Report No. 36985-GH Ghana Country Environmental Analysis November 2, 2007 Environment and Natural Resources Agence Française de Développement (AFTEN) Royal Netherlands Embassy Africa Region Department For International Development Document of the World Bank ACKNOWLEDGMENTS This Economic Sector Work is the result of a collaborative effort with the Royal Netherlands Embassy, the Agence Francaise de Dtveloppement, DFID, and the World Bank. It builds on analytical work produced over one year and on a previous ESW: "Ghana: Natural Resources Management and Growth Sustainability (2006)." This report was prepared by a team led by Jean-Christophe Carret (AFR) and Muthukumara Mani (ENV). The core team included Yvonne Fiadjoe, Hayato Kobayashi, Fernando Loayza (ENV); Benjamin Burckhart and Matteo Marchisio (AFR); Terry Green (Consultant-FRR); B j m Larsen, and John Skjelvik, (Consultants-ECON); and Sylke von Thadden (Consultant-WB). The principal editor was Deirdre Ruffino. The extended team included Gayatri Acharya, Carlos Cavalcanti and Edward Dwumfour (AFR); Kirk Hamilton (ENV); Wilma Van Esch (Royal Netherlands Embassy); Caroline Piquet (AFD); and Adele Faure (WB). The report benefited from extensive written comments received from peer reviewers Juan C. Belausteguigoitia (LCSEN); Richard Damania (SASES); Sean Doolan (DFJD);KirkHamilton(ENV); andPeterKristensen(AFR). We would like to further acknowledge Rose Ampadu (WB) and Victoria Wiafe (FRR) for their support to the team duringthe missions. Chapter 2 of the report draws on the recent WB publication "Where is the Wealth ofNations?" The work was carried out under the general direction of Mary Barton-Dock (Sector Manager-AFR) and Laura Tlaiye (Sector Manager-ENV). We would like to acknowledge and thank the Government of Ghana-the Ministry of Finance and Economic Planning (MoFEP), the Ministry of Food and Agriculture (MoFA), the Ministry of Lands, Forestry and Mines (MLFM), the Ministry o f Local Government, Rural Development, and Environment (MLGRDE), the Ministry of Environment, Science and Technology (MEST), the Forestry Commission (FC), the Minerals Commission (MC), the Ministry of Public Sector Reform, the Environmental Protection Agency (EPA), the Lands Commission, the Chamber of Mines, the Accra Metropolitan Assembly, the Geological SurveyDepartment (GSD), the Ministryof Women and Children's Affairs, the MiningSector Support Programme, the MinistryofTrade and Industry,the MinistryofWater Resources, Works, and Housing, the Office of Parliament, the Tema Municipal Assembly, the Council for Scientific and Industrial Research, the Public Utilities Regulatory Commission, and the Environment and Natural Resource Management ( E m ) sector group for the courtesies extended to the various missions, the meticulous attention and prompt response to our requests for information and data, and for their participation in developing the analysis and conclusions of this report. In addition, we are grateful for their active participation in exchanging ideas and discussing various aspects o f the sector with us over numerous meetings. We look forward to the continuationo f the positive and constructive engagement that has markedthis effort. We would also like to thank the agencies, civil society organizations and individuals who have helpedthe team to gain a better understanding of a range o f sector and related political and economic issues. We thank, for their valuable inputs:Pay Drechsel, Liqa Raschid-Sally, and Laamrani Hammou (International Water Management Institute), John Bruce (Land and Development Solutions International Inc.), George Gyan Baffour (Ministry o f Finance and Economic Planning), Gordana Kranjac-Berisavljevic (University o f Development Studies, Tamale), S.K Oppong (Kwame Nkrumah University of Science and Technology), Daniel Sarpong (University o f Ghana, Legon), Tsike-Sossah Eyram Simon (Abusua Foundation), Anna Antwi (ActionAid International Ghana), Rayborn Bulley (African Economic Journalists Forum), Rosetta Annan (Akuapem Community Foundation), John Dadzie Mensah (CARE International), Reverend Edward Baah Asamani (Christian Council Interfaith Based Initiative), Okyeame Ampadu Agyei (Conservation International), Louis Doe Atsiatorme (Dal Consult), Joshua Awuku-Apaw and Candy Adantor (Earth Service), Comfort Asante (EDA), EdwardAyensu (Edward Ayensu Associates Ltd.), Joe Asamoah (Enerwise Africa), Atsu Titiati (Enterprise Works Ghana), Samuel Annan (Foundation for Future Workers), Victor Agyeman (Forestry Research Institute of Ghana), George Awudi, Nana Darko Cobbina, and Christopher Manu (Friends of the Earth), Mevuta Donkris (Friends of the Nation), Hashmiu Ishmael (GACON), Augustus Asamoah (Ghana Wildlife Society), Richard - 111 9 . .- Amponsah (Ghana Institute of Management and Public Administration), Erasmus Owusu (Ghana Wildlife Society), MayonBilijo (GLFPSF), Annie MensahAbampa (Green Earth), Charles Ashie (Ghana Progressive Youth Movement), Felicia Tse (Hatof Foundation), Kojo Aidoo (Homes Foundation), Nichoal Adamtey (ISODEC), Evang. Billy Acquah-Graham (ICARE), Kwaku Attipoe (Kay Morris Foundation), Richard Nordu Nartey (Land for Life), Rowland Atta-Kesson (Legal Resource Centre), Michael Robertson (Micro Channel Systems), Ophelia Ayeh (Millenium Challenge Account), Ellen Moran and DeAndre Beck (Millenium Challenge Corporation), Isaac Gyamfi (IITA), Rajesh Shrestha ( S N V ) , Francis Quarme (Take Care Africa Foundation), Dramani Abdulai (Third World Network), Richard Emmilah and Hannah Owusu Koranteng (WACAM), Sal& Lukman (Waste Care Associates), Rachel Asigri, Anita Djandoh, Gianna DaRe, and Gloria de Paoli (Ricerca e Cooperazione), Charles Quansah (University of Science and Technology, Kumasi), and Kwame Awere-Gyekye (The Global Mechanism o f the UNCCD). - iv - Abbreviations and Acronyms continued ESW Economic and Sector Work LAP LandAdministrationProject EU European Union L C Lands Commission FA0 Food andAgriculture Organization M&E Monitoring and Evaluation FASDEP FoodandAgriculture Sector M A S Metropolitanor Municipal Assemblies Development Policy M C Minerals Commission FC Forestry Commission MDA Ministry,Department or Agency FDI Foreign Direct Investment MDBS Multi-Donor Budget Support FIMP Forest Inventory and Management MDF Mineral Development Fund Project MDG MillenniumDevelopment Goals FLEGT Forest Law Enforcement Governance, Trade MES MinistryofEnvironment and Science FO MinistryofEnvironment, Science and Forest Ordinance MEST Technology FOB Free on Board MLF MinistryofLands andForestry FR Forest Reserve MLFM MinistryofLandForestry andMining FSD Forest Services Division MLGRD Ministry of LocalGovernment and GDP Gross Domestic Product Rural Development GEF GlobalEnvironmental Facility MLGRDE MinistryofLocal Government, Rural GESS Ghana Environment Sector Study Development and Environment GIS Geographic Information System MMA Metropolitanor Municipal Assemblies GLASOD GlobalAssessment o f Human-Induced MMDA Metropolitan, Municipal and District Soil Degradation Assemblies GLFPSF Ghana Land andForestry Policy MoFA MinistryofFoodandAgriculture Support Facility MoFEP MinistryofFinanceandEconomic GoG Government o f Ghana Planning GPRS Growth and Poverty Reduction M O U Memorandum ofUnderstanding Strategy M o W H MinistryofWorks andHousing GPS Ghana Partnership Strategy MSDEP Mining Sector Development and GSBA Globally Significant Biodiversity Area Environment Program GSD Geological Survey Department MTR Mid-TermReview GTZ GermanAgency for Technical NationalAction Programto Combat Cooperation NAP Drought and Desertification (Deutsche Gesellschaft f3r Technische Zusammenarbeit) NEAP NationalEnvironmental Action Plan GWCL NEF Ghana Water Company Limited National Environment Fund GWD Ghana Wildlife Division NESPCC National Environmental Sanitation Policy Coordination Council HIPC Heavily Indebted Poor Countries NGO Non-Governmental Organization HQ Headquarters NLP NationalLand Policy HR HumanResources NP National Park IDA International Development Association NR NaturalResource IFAD International Fundfor Agricultural Development NRh4 NaturalResource Management IFC Northern SavannaBiodiversity International Finance Corporation NSBCP ConservationProject IGF Internally Generated Funds NSP National Sanitary Program IRS Internal RevenueService NTFP Non-Timber Forest Product ISODEC IntegratedSocial Development Center NTFR Non-Timber Forest Resources ISRIC International Soil Reference and InformationCentre O&M Operation and Maintenance IWLM IntegratedWatershed and Land OASL Office o f the Administrationo f Stool Management Lands JSA Joint Strategic Action OD1 Overseas Development Institute KMA KumasiMetropolitanAssembly OPR Output to Purpose Review (DFID) L.I. Legislative Instrument PA ProtectedArea - v - PADP Protected Areas Development Program TREC Timber Rights EvaluationCommittee PAMAB ProtectedAreas Management Advisory TRF Timber Rights Fee Board TUC Timber Use Contract PAF Performance Assessment Framework TUP Timber Use Permit PAh4WCP ProtectedAreas Management and TWN ThirdWorldNetwork Wildlife ConservationProject PAYE TWU Pay As You Earn Timber and Woodworkers Union UESP I1 PES Payment for Environmental Service UrbanEnvironmental SanitationProject I1 P M UNDP Project Memorandum UnitedNations Development Programme PPP UNEP Public-Private Partnership UnitedNations Environment Programme UnitedNations Industrial Development PRODICAF' UNIDO Promotion o fDistrict Capital Project Organisation PSP Private Sector Partnership UWP Urban Water Project PURC Public Utilities Regulatory VAT Value-Added Tax Commission VIP RNE Ventilated ImprovedPit Latrine RoyalNetherlands Embassy Wassa Association o f Communities RR W A C A M Resource Reserve Affected by Mining SDI Spatial Data Information WB World Bank SEA Strategic Environmental Assessment wc Water Closet SLM Sustainable LandManagement WD Wildlife Division S N R Strict Nature Reserve WDI WorldDevelopment Indicators SNV Netherlands InternationalDevelopment WDR Organization World Development Report WDSP SP Wildlife DivisionSupport Project Salvage Permits W M D SRA Social Responsibility Agreement Waste Management Department swc WRC Soil and Water Conservation Water Resource Commission TIDD Timber IndustryDevelopment Division - vi - Table of Contents Executive Summary............................................................................................................. 1 1Introduction., ...................................................................................................................... 8 Backgroundand context .............................................................................................................. 8 Objectives and scope .................................................................................................................... 9 Impacts and linkages with ongoing initiatives ........................................................................... 10 Methodology and Approach ...................................................................................................... 11 Structure of the CEA Report ...................................................................................................... 12 2 NaturalResourcesand Growth inGhana ........................................................................ 14 Background ................................................................................................................................ 14 Where i s the Natural Wealth o f Ghana? ................................................................................... -16 How Muchi s Ghana Saving Per Capita? 18 Conclusion ................................................................................................................................. ................................................................................... 21 3 Forestry andWildlife ...................................................................................................... 23 Key Featuresofthe Sector 23 Principal Policy Issues ............................................................................................................... ......................................................................................................... 31 Legal Framework 36 Institutions ................................................................................................................................. ....................................................................................................................... 38 ImpedimentsandIncentivesfor Change .................................................................................... 42 Key FindingsandRecommendations ....................................................................................... -53 Forest and Wildlife Recommendations ...................................................................................... 60 4 Mining ............................................................................................................................. 66 Overview and Diagnosis ............................................................................................................ 66 Policy, Legal. and Regulatory Issues ........................................................................................ -71 Institutional Analysis ................................................................................................................ -76 FiscalAnalysis ofthe MiningSector ......................................................................................... 80 KeyFindings and Recommendations ....................................................................................... -90 5 LandResources.............................................................................................................. 4.6 MiningReformand Investment RoadMap, 2006-2025 ............................................... 94 -96 Introduction ................................................................................................................................ 96 LandResourcesandLandDegradationinGhana: Overview .................................................... 97 Solutions to LandDegradation: Sustainable LandManagement inGhana ............................. 106 Why SLMis not widely adopted: Underlyingcauses.............................................................. 108 Proposed Solution .................................................................................................................... 118 Implementation Mechanisms and Short-term Follow-up Actions ........................................... 126 5.7. Land ResourcesReform and Investment RoadMap. 2006-2025 ............................... 129 6 UrbanEnvironment., 135 Introduction .............................................................................................................................. ..................................................................................................... 135 Water Supply ........................................................................................................................... ................................................................................ 138 The Way Forward.................................................................................................................... Sanitation and Solid Waste Management 145 160 7 Conclusion .................................................................................................................... Urban Environment Reform and InvestmentRoadMap, 2006-2025 ...................................... 164 167 Findings ................................................................................................................................... 167 Recommendations .................................................................................................................... 167 Table 19: EstimatedAnnual HealthEffects o fUrbanOutdoor Air Pollution.................171 Integration of CEA Sector Recommendations ......................................................................... Table 21: EstimatedValue of Statistical Life inGhana .................................................. 185 187 Table 23: EstimatedUnit Cost byHealthEnd-Point ....................................................... 188 .vii. Table 26: Baseline Data for Estimating HealthEffects................................................... Table 33: HealthRiskso f Indoor Air Pollution............................................................... Table 27: Estimated Annual HealthEffects from Water, Sanitation, Hygiene ...............191 192 Table 34: Baseline Data for Estimating Health Impacts.................................................. 196 Table 35: EstimatedAnnual Cost o f Indoor Air Pollution (Urban areas) ....................... 197 Table 36: EstimatedAnnual Cost o f Indoor Air Pollution (Rural areas) ........................ 198 References........................................................................................................................ 242 Appendix 2.ForestryandWildlife .......................................................................................... 198 205 Appendices Appendix 1.Methdologvfor Evaluating the Costs of Natural Resource and Environmental Degradation 175 Appendix 2 Forestry and Wildlife . ............................................................................................ 205 Appendix 3. Mining ............................................................................................................... 213 Appendix 4-1: TheAgricultural Sector ...................................................................................... 218 Appendix 4-2: Erosion Hazards by Region ................................................................................. Appendix 4-3: Immediate Causes of Land Degradation: Biophysical and Anthropogenic Factors .........220 221 Appendix 4-4: Mainprocesses of Land Degradation in Ghana ....................................................... 224 Appendix 4-5: Technical Options. Characteristics. Risks. and Long-term Efects of Soil Conservation in Diferent Agro-ecological Zones in Ghana ............................................................................. 225 Appendix 4-6: Policy Framework-Key Environmental Policies. Strategies. and Action Plans .............229 Appendix 4-7: TheNational Land Policy ................................................................................... 231 Appendix 4-8: TheNational Action Program to Combat Drought and Desertification ....................... -232 Appendix 4-9: Key Land Legislation ......................................................................................... 234 Appendix 4-10: LandAdministration Project (LAP) ..................................................................... 236 Appendix 5. Urban Environment .............................................................................................. 238 Appendix 6. Conclusion .......................................................................................................... 240 Listof Figures Figure 2-2: Annual Cost of Degradation (millions US$)........ Figure 2-1: Ghana. Real GDPper capita (1970-2004) ................................. Figure 2-3: Real Savings versus Genuine Savings in Ghana......................... Figure 3-1: Taxesand Charges Faced by the Timber Industry in 2003........................................................ 28 Figure 3-2: Degradation ofPamu Berekum and TainIIForest Reserves .................................................... 29 Figure 3-3: Map of Ghana Showing Condition of Forest Reserves.,............ ......................................................................................... Figure 4-2: Comparison of Fixed and Flexible Royalties............................. Figure 4-1: GoldProduction in Ghana........ 67 Figure 4-3: Comparison of Gross Production Valueand Government Reve Figure 4-4: Distribution of Mineral Royalties (% share).............................................................................. 83 osition of the Allocated Budget by Agency in 200 (as a share of total mining sector .......................................................................................................................................... 86 sector: Composition of the Allocated Budget by Agency and by Sources in 2005 (as a ................................................................. 86 Figure 4-7: Comparison ofMC's Income and Expenditures (in billions of cedis) ............ share of total mining sector budget)............ Figure 4-8: Composition ofAllocated EPA Budget in 2004 and 2005 (in billions of cedis)......................... 87 88 Figure 5-1: Natural Capital in Ghana.......................................................................................................... 97 Figure 5-3: Percentage of Increase in Production, Cultivated Land, and Productivity (Cereal/Crops) ....103 Figure 5-2: Percentage of Increase in Production, Cultivated Land, and Productivity (RootdTubers) .....103 Figure 6-1: Health Cost Estimates (billions of cedis per year)............................... Figure 5-4: Distribution of Soil Degradation in Ghana.............................................................................. 104 ...........137 Figure 6-2: Water Supply Chain when Secondary Vendors are Involved.... ....................... 139 .Vlll.... Figure A3-I: Comparison of the Allocation and Execution of the Investment Budget (in billions of cedis) ..................................................................................................................................................................... 215 Figure A3-2: Financing of the Investment Budget, 2002-2004 (as a share of total Ministry of Mines investment expenditures) ............................................................................................................................. 215 Figure AS-I: GWCL-Budgetary allocations by sources of funding in 2005 (percentage) ........................ 239 List of Tables Table 2-1: Comparison of Average annualizedper capita growth rates of WestAfrican countries (1980-2002) ............................................................................................................................................. 15 20 Table 3-1: Typology ofForest Areas............................................................................................................. untingfor Changes in Wealth Per Capita in Ghana............................................................ 23 Table 3-2: Principal Forest Legislation Currently in Force......................................................................... Table 3-3: Principal Wildlife Legislation Currently in ForcerPLEASE PROV. SOURCE] ......................... 37 37 Table 3-4: Forestry Commission-Budgetary 39 Table 3-6: Funding of the MLFMBudget by Sources of Funding, 2004 and 2005 (in millions of US$)......40 Table 3-5: Sector Institutions: Indicative Impacts of Policy Execution ........................................................ Allocations and Actual Spending )...................................... 48 Table 3-7: Contribution of HIPCResources to the MLFMRe-aforestation Program, 2003-2005..............49 Table 3-8: GPRS Costing of the Focus Area Restoration of Degraded Environment and N M , 2006-2009 (in millions of US.$)........................................................................................................................................... 53 Figure 4-2: Comparison of Fixed and Flexible Royalties ............................................................................. Table 4-1: Comparison of Licenses with Applicable Area Size..................................................................... 72 76 Table 4-4: Mining Sector by Sources ofRevenues, 2000-2004 (in millions of US$andpercent).................82 Table 4-3: Central Government Revenue Sources by Sector, 2001-2004 (in million of US$)...................... 81 Table 4-5: Distribution of Earmarked Mineral Royalties (in millions of US$),1999-2004.......................... 84 Table 4-6: The ConsolidatedFund ofthe EPA in 2003 and 2004 ................................................................ Table 5-1: GDP vs. Sectoral Growth Rate (2001-2009) ................................................................ 89 Table 5-2: Percentage of land area affected by soil erosion... Table 5-3: Percentage of Land Area Afected by Human-In Table 5-4: Percentage of Land Area Afected by "Moderate to Very Severe''Soil Degradation (Cross-country .......................................... 100 Table 5-5: Percentage of Land Area Vulnerable to Desertification............. Comparison) ................................................................................................. .......................................... 100 Table 5-6: Roots/Tubers: Production, Cultivated Land, and Productivity (I995-2003) ............................. 102 103 Table 5-8: Production Growth in the Agricultural Sector and Subsectors (2002-2004) ............................ Table 5-7: CereaKrops: Production, Cultivated Land, and Productivity (I995-2003) ............................ 104 Table 5-9: Benefits of Low-input Technologies in Mitigating the Effects of Land Degradation.................107 Table 5-10: Policy Issues and Impacts on Land DegradatiordSLM............................................................ 110 .............................. 111 Table 5-12: Institutional Issues and Impacts on Land DegradatiodSLM ............. Table 5-11:Regulatory Issues and Impacts on Land Degradation/SLM ............... 113 Table 5-13: Decentralization Issues and Impacts on Land DegradatiodSLM........................................... .............................. Table 5-14: Incentive Issues and Impacts on Land Degradation/SLM ....................................................... 114 116 Table 5-16: Policy and Regulatory Issues, Opportunities and Proposed Actions ........................ Table 5-15: Benefits of Low-input Technologies in Mitigating the Efects of Land Degradation ...............118 Table 5-17: Institutional Capacity Issues, Opportunities, and Proposed Actions........................ Table 5-18: Technological/Investments Issues, Opportunities, and ProposedActions............................... 125 Table 5-19: Knowledge Management Issues, Opportunities, and Proposed Actions.................................. 126 Table 6-1: MLGRDE :Spending and Budgetary Allocations in 2004 (inpercentage) ............................... 152 Table 6-2: Budgetary allocations to the municipality of Tema by Department, 2004-2005 (inpercentages)l55 Table 6-3: ESP Targetsfor Environmental Sanitation and WasteManagement ........................................ 158 Table 6-4: Targets in GPRS II..... ................................................................................................................ 159 Table 7-1: Cross-Cutting Recommendations ............................................................... 169 Policies ........................................ ............................................................... 169 Institutions................ ........... ............................................................... 169 .ix. Dialogue...................................................................................................................................................... 170 Table 1: The Valueof Soil Loss on Crop Value: Lost CropProduction ..................................................... 178 Table2: The ValueofNutrient Loss in Terms ofNPK. 2003...................................................................... 179 TableA3-2: Collection of Revenues and Employment ................................................................................ TableA3-1: Key Mining Legislation ............................................................................................ 213 TableA3-3: Contribution of Mining Sector to total Collection of IRS (Royalties, PAYE, Corporate/Income) (in percent) ................................................................. ................................................................................. 213 TableA3-4: Mining Sector-Central Government Allocation and Expenditures, 2002-2004 .................... 214 TableA3-5: Financing of the Mining Sector by Recurrent and Investment Expenditures, 2002-2004 (percentage) ............................................................................... ................................................................................. 214 TableA3-6: Distribution of Public Resources within the MoLFM in 2005................................................. 216 TableA3-7: Composition of Budgetary Allocations by Sources of Funding, 2005(in millions of US$and as a share of total MoLFMbudget) ................................ 216 TableA3-8: Income of the Minerals Commission, 2002-2005 (in billions of cedis) ................................... TableA3-9: Comparison of MC Income and Expenditure, 2004 and 2005 (in billions of cedis) ...............217 217 217 TableA4-1-1: GDP vs. Sectoral Growth Rates 2001-2009......................................................................... TableA3-IO: Composition of the MES Budget in 2005 (percentage) ......................................................... 218 TableA4-1-2: Agricultural Sector: Percentage of Subsector Contribution to Agricultural GDP,2000-2004219 219 TableA4-2-1: Erosion Hazards by Region ................................................................................................. TableA4-1-3: RootdTubers and Cereal/CropsProduction per Year......................................................... 220 TableA4-4-1 - Erosion on bareplots within diferent ecological zones in Ghana ..................................... 224 TableA4-4-2 - Nutrient depletion rates in Ghana and Sub-Saharan Afiica ............................................... 224 225 TableA4-5-2: Indigenous Soil and Water Conservation System in Northern Ghana................................. TableA4-5-1: Technological Optionfor Soil Conservation and Agro-ecological zones............................ 226 TableA4-5-3a: Risks Associated with VariousSLMPractices................................................................... 227 TableA4-5-3b: Long-term Efsects Associated with Various SLMPractices.,............................................. 227 TableA4-5-3c: Assessment of VariousMethodsfor Soil Fertility Management......................................... 228 TableA4-9-1: Key Land Legislation ........................................................................................................... 234 TableA5-I: MWRWH-Central Government Allocation and Expenditures, 2002-2005.,......................... 238 TableA5-3: MLGRDE -Central Government Allocation and Expenditures, 2002-2005.......................... TableA5-2: MWRWH-Budgetary Allocations by Department and Sources of Funding in 2005............238 239 Table 6A-I: Projected Development Assistance in the Forestry and Wildlife Sector, 2006-2008 (in millions of US$)..................................................................................................................................... Table 6A-2: Projected Donor Assistance in the Mining Sector, 2006-2008 (in millions of US.$).............240 Table 6A-3: Projected Donor Assistance in the Land Sector, 2006-2008 (in millions of US$)..................240 Table 6A-4: Projected Donor Assistance in the Urban Sector, 2006-2008 (in millions of US.$).............241 241 ListofBoxes Box 2-2: Calculation of Genuine Savings ................................................................ Box 2-1: Whereis the Wealth of Nations?................................................................................ Box 3-2: Mining in Forest Resewes......................................................................... Box 3-1: Primary Timber Processing in Ghana: A Value-Subtracting Industry...... Box 3-3: Securing the Resource ...................................................................................... Box 3-4: Tax Exemptions of Benefit to the Industry ........................... ...................................................... 35 Box 3-5: Does Community Management Work in Ghana? ........................................................................... 44 Box 3-6: Public Sector Corporate Governance in Ghana......................... ............................................... 46 ............................................... 52 Box 3-8: Regulating Private Investment-The Underlying Governance Challenge ..................... Box 3-7: Forestry, Wildlife, and GPRS11: Contrasting Messages.,.......... Box 4-1: Socioeconomic and Health Impacts of Industrial MiningActivities in the Tarkwa Reg1 Box 4-2: Environmental and Social Aspects of ASM..................................................................................... 70 Box 4-4: Demandfor Improved Compliance........................................ Box 4-3: Regulation of ASM in Ghana................................................. 71 ............................ 79 80 Box 4-6: Benefits of Implementing EITI............................................... Box 4-5: Corporate Social Responsibility in the Mining Sector.................. ............................ 90 - x - Box 5-1: Population Growth and Land Degradation.................................................................................. 101 Box 5-2: Poverty and Land Degradation .................................................................................................... Box 5-3: Potential Impact of Climate Change on Land Resources and Economic Growth in Ghana........101 Box 5-4: Linkages between Land Degradation, Forestry and MiningActivities ........................................ 105 106 Box 5-5: Impact of TradeLiberalization on Land UseDecisions in Ghana............................................... Box 5-6: Paymentfor Environmental Services (PES) and Sustainable Land Management ........................ 115 Box 6-1: Principal of Environmental Components ..................................................................................... 146 120 Box 6-2: Ghana's Fiscal Decentralization ..................................................................................................154 Box 7-1: What is Environmental Governance?........................................................................................... 168 .xi. Executive Summary Introduction 1. Ghana's economy is expanding at a commendable growth rate, with an average annual GDP growth of about 6 percent. As a result, the country has made considerable progress in laying the foundations for sustainable growth and poverty reduction. The Government of Ghana i s &her committed to achieving faster poverty reduction: accelerated growth i s set to play a key role, and Ghana's Growth and Poverty Reduction Strategies (GPRS II), driven by agriculture and private sector development, are focused on continued growth. 2. However, Ghana's natural resources, upon which so much of the country's economic activity and the population's livelihood depend, are being depleted at an alarming rate: more than 50 percent o f the original forest area has been converted to agricultural land by clearance for perennial or annual cropping and slash-and-burn cultivation practices. Crop yields have stagnated, and productivity has declined because of rampant soil erosion. Fish, timber, and nontimber forest product stocks are decreasing rapidly. Coastal towns are facing severe water shortages during the dry season. Wildlife populations and biodiversity are in serious decline. Health-related pollution-indoor and outdoor air pollution, and water and sanitation issues-have emerged as serious healththreats for the majority of the population. 3. All of these factors threaten to reduce Ghana's GDP growth in the near future. From a broader view, if we measure Ghana's productive base not simply as growth inGDP, but also interms of human, natural, and social capital, Ghana's recent economic growth achievements look much less impressive and much less sustainable. Recent estimates of the cost of natural resource and environmental degradation suggest that the equivalent o f 9.6 percent of GDP i s lost annually through unsustainable management o f the country's forests and land resources and through health costs related to water supply and sanitation, and indoor and outdoor air pollution. This has a significant impact on the capacity o f the country to sustain its growth, as it substantially reduces the genuine savings rate (a measure o f growth sustainability that takes environmental factors into account). 4. Considerable changes are also under way inthe architecture o f development assistanceto support national priorities. There i s a general shift toward budgetary support and sector-wide programs to align with country priorities, strengthen country systems, and reduce the transaction costs of dealing with multiplepartners and projects. This shift has implications for addressing environmental issues that are integral to many different sectors. In light of this new approach, the Government o f Ghana (GoG) and development partners have considered how best to deal with these issues and have jointly developed a natural resources and environmental governance budget support operation as a response to the findings in the CEA. Scope and objectives 5. The Ghana Country Environment Analysis (CEA) has thus been formulated to assist the Government o f Ghana and its development partners to: (a) assess the country's environmentalpriorities in key sectors, the environmental implications of key economic and sector policies, and the country's institutional capacity to address them; and (b) find practical management, institutional, and policy solutions to handle issues of natural resource management, environmental degradation, and sustainability of growth. 6. The CEA evolved in the context of the 2006 Ghana Joint Assistance Strategy, which marked a shifttowards increasing harmonizationand collaborationbetween development partners (DPs), which the CEA exemplifies. The CEA was also developed in a time period where the importance of cross-cutting NRE issues was emerging - in large part also due to the preliminary findings of the CEA - and where budget support as a means to address overarching policy issues was becoming a preferred funding modality. It should be noted that a substantial series of consultations and dialogues with development - 1 - partners, government institutions, and civil society organizations went into the development of the final document. 7. The CEA i s not intended as a comprehensive "state of the environment" report and so does not address all possible environmental or natural resource aspects, but functions rather as a key input to stimulate the ongoing policy dialogue in the country. Although the CEA highlights the main environmental challenges, it does not identify Ghana's environmentalpriorities but rather focuses on the priority issues in key environment and natural resource sectors that are critical for both growth and poverty reduction in Ghana: forestry and wildlife, mining, land resources, and the urban environment (water supply, sanitation, and waste management). The analysis focuses on the underlying policy, financial, and institutional causes of environmental degradation, rather than on its symptoms. Outputs,value added, and results 8. The two main outputs o f this CEA are (a) a comprehensive report that provides-for each sector/asset-an overview of the sector and its contribution to growth, an analysis of the underlying causes o f degradation (with a specific focus on policy, regulatory, and institutional issues and applying public expenditure review as an analytical tool), and a set o f implementable recommendations to address these issues; and (b) a set o f policy/action matrices that provide-for each sector/asset-a road map for action inthe short, medium, and long-term. 9. The CEA has already contributed to mobilizing, strengthening, and anchoring the Environment and Natural Resources Management (ENRM) dialogue between the government and development partners involved inthe Multi-Donor Budgetary Support (MDBS)Group. The CEA has had an immediate impact on the ground in that it has provided concrete inputs to the MDBS and World Bank Poverty Reduction Support Credits (PRSC) IV and V. For instance, the trigger identified for the forestry sector in the MDBS/PRSC performance assessment frameworks (PAFs) was one of the measures in the CEA; the 2006 MDBS PAF also includes a second forestry target and a target relatedto environmental governance. The 2006 PRSC V uses this secondforestry targetas atrigger, 10. The creation of a multi-donor natural resources and environmental governance (NREG) sector budget support became a specific request of the Government o f Ghana (GoG) after the results of the CEA and other analytical studies were publicized. Below we provide some o f the key recommendations o f the CEA, followed by some sector-specific findings andrecommendations, and the way forward. Mainfindings and key recommendations 11. Based on the results of the sectoral analysis, the key messages of the CEA can be summarized as follows: 0 Strengthening environmental governance is key to ensuring that natural resources contribute to greater wealth and sustainable growth. Stronger environmental governance in the naturalresource sectorsis critical to ensurethat (a) these sectors optimally contributeto future growth, and (b) economic growth does not come at the cost of environmental degradation. In rent-seeking sectors such as forestry and mining, more transparent and accountable fiscal management o f relevant agencies, including the Forestry Commission and Minerals Commission, i s of particular importance to avoid short-lived consumption o f natural resources that will leave a country poorer than before. Gettingthe most from natural resources implies:better regulation and management, and less wasteful utilization, of natural resources; more effective capture o f the economic value o f the resource; better collection o f revenues; and higher levels of reinvestment and savings. 0 Removing policy, regulatory, and institutional bottlenecks is crucial for reducing vulnerability of the poor in both rural and urban areas. In the land resource and urban - 2 - environment sectors, cleaner and low-tech options are available to lessen environmental stress. These technologies may contribute significantly to reducing the vulnerability o f the rural and urban poor. However, they are not widely adopted because o f the existence o f a number of obstacles and bottlenecks, includingpolicy, regulatory, and institutionalbarriers. To remove these barriers, actions that can create an enabling environment for scaling up these technologies are urgentlyneeded. 0 Reinforcing coordination and dialogue to mainstream ENRM is critical. Environment i s a cross-cutting issue that requires coordination at the highest level. Recognizing this, the Government of Ghana should consider the creation of an environmental oversight mechanism- perhaps at the cabinet subcommittee level-to examine environmental integration across the full range of GPRS interventions. Typically, government agencies both prepare and review/approve environmental policies that have an impact on local communities. Although local communities have the potential to play a pivotal role inimproved management o f Ghana's naturalresources, to date they have not been actively engaged in the decision-making processes. In order to create a comprehensive system for environmental management, it i s important for all stakeholders to be actively engaged inthe policy dialogue. 0 Ministries, departments, and agencies in all the natural resource and environment sectors face common challenges. It has become clear that developing collaborative cross-sectoral approaches to address these common issues will be more useful and efficient than dealing with them separatelyineachsector. Sector Specific Findings and Recommendations Forestry and Wildlife 12. A common misconception regarding Ghana is its "abundant forest wealth." In fact, publicly available satellite imagery shows southern Ghana as a mosaic of depleted reserves, surrounded by "off- reserve" agriculture. The policy to date has been to allow the conversion o f the off-reserve highforests to agriculture, and these have beena major source o f timber for the timber-processing industry. 13. In the wildlife sector, theoretically the state controls exploitation through licensing, but in practice it has not been able to effectively regulate at the local level. The state's inability to properly manage forest reserves and guard Ghana's protected areas has facilitated an open access system for wildlife hunting, with few benefits to communities. The wildlife resource effectively belongs to, and is managed by, no one. The "empty forest" syndrome and the loss of savanna wildlife populations, off reserve, are symptoms o f poor management o f commonproperty. 14. The potential of the timber industry has not been realized. Industry has captured much of the value of forests, but in an inefficient way (average conversion rates for sawmilling are around 30-35 percent). Too little processing for high-value export markets occurs (furniture, parts, moldings), and estimates indicate that the primary processing would be value-subtracting if timber were priced at world market prices. 15. Over the last 15 years, the Government o f Ghana's policy on plantations has been in disarray. Initiatives that did not fully succeed include: an aborted effort to privatize plantations in 1995; Subri plantation, which converted high biodiversity natural forest to plantations for a never-realized pulp scheme; the ultimately underfundedForest Plantation Development Fund; and the Heavily IndebtedPoor Country plantationoperation. 16. Unsustainable management of forests i s a symptom sometimes misdiagnosed as a cause. The possible set o f actions that the CEA recommends are: 17. Strengthenfinancial arrangements for the Forestry Commission. There i s strong recognition of the challenges facing the forest and wildlife sector. In general the policy and legislative framework is - 3 - agreed to be adequate, and significant progress has been made in recent years in institutional development, but severe challenges remain relating to the implementation and enforcement o f laws on forests, wildlife, protected areas and habitat management. All respondents - from within Government, development partners and civil society stressed the need for urgent attention to resolving the causes o f forest degradation and habitat loss, and dealing with (i)underlying governance and institutional problems, and (ii) the insecure financial arrangements for the Forestry Commission, as sector regulator. 18. Promote plantation development. Plantation activities have recently been harmonized and the anomaly o f ministry involvement in operational plantation afforestation through HIPC funding has now ended. There i s an immediateneedto confirm and clarify the rights o f participants inthe recent plantation programs, and work towards creating an enabling environment for commercial and small-scale private sector investment in forests. 19. Maximize rent capture. Government retains its espoused commitment to the use o f competitive mechanisms for the allocation o f rights to exploit timber and wildlife resources on reserves and in protected areas, in order to maximize the capture o f the economic rent within these resources. However, private sector investors have been able to effectively evade the spirit and intent o f GoG policies, through for example timber utilization contracts (TUCs) allocated through mechanisms other those promoted in GoG legislation, the illegal use o f timber use permits (TUPS)and small scale permits, and non-transparent negotiations on some wildlife park concessions. 20. Restructure the timber industry. The policy goal o f promoting tertiary and value-added processing i s not being achieved. Players in the industry are undertaking concerted lobbying efforts to capture GoG policy-making in order to reduce their payments o f forest taxes; the specter o fjob losses i s still being used as a rationale to delay change. Industry itself needs to be encouraged to put forward proposals to deal with the over-capacity inthe industryrelative to a "dwindling" resource and the limited investment invalue-added processing. 2. Mining 21. Ghana continues to have an important geological potential that goes beyond gold and diamonds, particularly in construction minerals and bauxite. Moreover, Ghana has recently adopted a new mining law. This situation creates opportunities for mining activities to promote economic growth and poverty reduction ina more environmentally and socially responsible manner. To fulfill this potential, the possible set o f actions that the CEArecommends are: 22. Modify the royalty regime to take advantage of market booms. As mentioned above, in the current metals market, Ghana has missed some of the opportunity to significantly increase its revenues from royalties without affecting the competitiveness o f the mining sector. Metal prices have risen greatly inthe last two years, inseveral casesreachinglevelsthat havenot been seen since the 1970s.Goldprices more than doubled in the last three years. Royalty rates in Ghana can range between 3 and 6 percent. However, current calculationprocedures fix rates prior to the start-up o f the mine, and usually at a lower rate. As increases inmetal prices mainly translate into benefits for the operations already established, it i s recommended that royalty rates be allowed to vary along with metal prices. In this way, part o f the windfall profits from price spikes could also be shared by the state and used to improve both environmental management and living conditions, as well as create wealth inthe miningregions. 23. Conduct a trilateral policy dialogue to incorporateenvironmentaland social considerations into legal instruments and mining policy. The concerns and needs o f stakeholders involved in and affected by mining, especially artisanal and small-scale mining (ASM), and those related to land compensation and postclosure restoration must be addressed. To this end, conducting a participatory trilateral policy dialogue i s recommended. The dialogue would focus on miningpolicy, institutions, and governance to address priority environmental and social concerns o f domestic players as local - 4 - communities and ASM. Results o f this dialogue should be incorporated into sector policies and into the implementationof the New MiningLaw. 24. Increase support to domestic miners. ASM not only i s a major source o f employment, but also has a large environmental impact on Ghana. Thus, sound management of this segment offers opportunities for economic growth and poverty reduction inan environmentally and socially responsible manner. A comprehensive program dealing with issues o f mining rights, access to appropriate technologies and funding, and human and natural resource management for ASM i s needed to address the seemingly intractable environmentaland social problems relatedto this group o fminers. 25, Redistribute revenues to strengthen institutional capacities and regional development. Institutional capacity needs to be strengthened through additional funding to improve environmental management. The purpose o f these funds would be to (a) augment those already available inthe Mineral Development Fund (MDF) and (b) allocate funds for local and regional development in addition to those already earmarked in the MDF for local authorities. To guarantee the best use of these resources and leverage additional monies, the creation of a separate development fund i s recommended. The proposed fund may receive a portion of mining royalties and contributions from donors that would be spent according to a plan approved and monitored by mine-adjacent communities through a participatory and transparent process. 3. Land Resources 26. Sustainable utilization of the country's land resources i s a necessary precondition to achieving and maintaining the economic growth rate necessary for Ghana to attain the status of a middle-income country. Several low-input, site-specific technologies and conservation practices that substantively reduce land degradation while enhancing productivity (sustainable land management) are currently applied in Ghana. However, large-scale adoption of these practices continues to be elusive. Several factors (including policy, regulatory, institutional, and incentive barriers) prevent a wider adoption o f sustainable land management (SLM) practices. A number of actions are proposed here to remove these barriers. Jointly, these actions would contribute to the development of a strong framework for sustainable land management. The possible set of actions that the CEA recommends are: 27. Harmonize and strengthen policy, regulatory and incentive framework. Land degradation and sustainable land management elements are still weakly integrated into the key development and sectoral policies, strategies and action plans. The existing regulatory framework i s characterized by a plurality o f land tenure and land management systems (i.e. statuary and customary) and by a multitude of laws andregulations, often outdated or incontradictionwith each other. Inaddition, the existingincentive framework characterized by weak tenure security, inadequate access to credit, inappropriate pricing of - resources, and poorly functioning markets - does not provide the adequate incentives to farmers for long- term investments inlandmanagement. 28. Strengthen SLM governance. The existing institutional framework - characterized by duplication of roles and responsibilities among the institutions with a mandate for land management and administration - doesnot provide a clear direction for land utilization and management. Inaddition, weak cross-sectoral coordination results in incoherent and un-harmonized policy development, inefficient or sub-optimal allocation of resources, and does not favor a comprehensive approach to address land degradation. Finally, weak institutional capacity for SLM has been identified as one o f the main constraints to enforcement of policies and regulations. 29. Improve knowledge management and dissemination. Generally limited knowledge on the extent, impacts, costs o f land degradation and economic benefits of sustainable land management and limited use of Spatial Data Information and Geographic Information Systems limit on the one hand the attention to the problem by key decision-makers, and on the other hand the capacity to understand and comprehensively address the problem of land degradation. In addition, limited and unorganized - 5 - information on the specific characteristics and requirements o f sustainable land management practices, and limited information on the contextual factors that determine the sustainability and replicability o f sustainable land management, limit the capacity to promote and scale-up sustainable land management in the country. 4. Urban Environment Water Supply 30. Inadequate water supply, sanitation, and hygiene have a very strong negative impact on human health and mortality rates. More than 8,000 people die every year from diseases related to poor water supply, sanitation, and hygiene conditions. Seventy percent of the morbidity inGhana is attributedto the same shortcomings. 31. The supply of piped water i s inadequate-both the extension and quality o f the services. A low proportion of the poor urban population has access to potable water, and the supply to those who are connected suffers from frequent interruptions because o f leaks and the like. Sale of water through unregulated secondary vendors and improper storage o f the water in households frequently result in serious health-related problems. A general upgrade o f the water supply sector is crucial. New water sources are also needed, especially inAccra, as i s better protection for the existing sources. Improving the urban water supply will require strengthening the operations o f the Ghana Water Company Ltd. (GWCL) through the newly signed management contract with a foreign operator, providing funding for further expansion of the piped system, and improving the quality o f the water suppliedby secondary vendors. 32. Most of the necessary framework for implementinga sustainable water supply system for the urban areas i s inplace. The legislationregardingthe various parts of the systemhas beenadopted, and the institutions needed to run the system are established and their roles clearly defined. Establishing the Public Utilities Regulatory Commission (PURC) has been particularly important to facilitate the regulation of tariffs and quality of supply. However, PURC enforcement i s still weak. 33. The possible set of actions that the CEA recommends are: (i) strengthening the capacity o f the GWCL to efficiently manage its contract with the private operator (including improving its planning and monitoring functions), (ii) strengthening PURC to improve its monitoring and enforcement capacity, (iii) to continue an upgrading of the infrastructure, and (iv) buildingthe capacity to better monitor the quality of water provisions by secondaryproviders across the distribution chain. Sanitationand Solid WasteManagement 34. The number of sanitation facilities in Ghana continues to be quite low. Estimates suggest that 30 percent o f the populationinthe largest cities have household latrines, and 30 percent use public toilets. In some poor communities, less than 10 percent of households have latrines. Moreover, the quality o f sanitation facilities in urban areas remains far from satisfactory. Almost all parts o f the various systems are malfunctioning, and in several poorer urban areas these services are almost nonexistent. At the household level, poor hygienic practices by individuals and communities are compounded by insufficient and ineffective hygiene education. Consequently, various health problems have arisen among the population. Vector-borne diseases such as malaria and bilharzia are rife because of the virtual absence o f vector control programs for pests and disease. All of these factors have serious health impacts; indeed, more than half of all reported diseases are related to poor environmental sanitation and the attendant social and economic costs. In addition, flooding from broken pipes causes major damage to public infrastructure and private property. 35. The situation in solid waste management is worse. Ninety-one percent o f the population faced unsafe methods of solid waste disposal. Moreover, less than 40 percent o f urban residents are served by solid waste collection services. Less than a third o f the daily refuse generatedi s decently disposed of, and - 6 - the rest is abandonedto pollute the environment. Eventhe existingdisposal sites and landfills are poorly managed; some of them are leakingpollutedwater into the surroundings and becoming a breeding ground for mosquitoes, parasites, and the like. 36. The possible set of actions that the CEA recommends are: (i) increasing the capacity of District Assemblies, Municipal and Metropolitan Authorities to better regulate and monitor waste management and collection, sanitation services, management of landfills and waste disposal sites; and the enforcement o f building codes; (ii) more effective enforcement by local government agencies o f urban plans and layouts, in cooperation with the Town Country Planning Department; (iii)greater coordination and clarification of responsibilities (mandates) i s needed on the environmental side o f Municipal and Metropolitan Authorities, the District Assemblies, the Town and Country Planning Department and Environmental Protection Agency and (iv) awareness raising on the health impacts, which was much highlighted among all stakeholders. Theway forward 37. Institutional capacity and low access to accurate data and financial informationpose fundamental challenges to the allocation and use o f resources and implementation of public policy. The CEA indicates that greater attention needs to be paid to the implications of environmental factors for economic growth and the trade-offs that may be required across sectors. Policy, regulatory, and incentive frameworks relating to environmental management are complex, often with overlapping institutional mandates and outdated legislative measures that can lead to anomalies in interpretation and program implementation. An immediate need exists for strengthening the intersectoral coordination mechanisms to foster sustainable growth. 38. Officials and civil society increasingly recognize that the environmental and social impacts o f broader economic and development policies needto be considered up front. Giventhe expanding mandate and increasing responsibility placed upon country systems and institutions, and with the analytical foundation providedby the CEA, the Ministry o f Finance and Economic Planning recognizes the need to develop an environmental management oversight and governance mechanism across the full range of GPRS IIinterventions. 39. Byhighlightingcross-cutting issues and providing aroadmap for reforms and investments inkey sectors inthe mediumand long-term, the CEA should also be a useful tool inproviding inputs duringthe reviewing and renegotiation of future development strategies. These include the next MDBSPRSC VI, the design of the next Government of Ghana Growth and Poverty Reduction Strategy (GPRS), and the upcoming multidonor Natural Resources and Environmental Governance (NREG) sector budget support Program. Infact, the CEA did not just provide inputs to the NREG Program but was actually the main catalyst for its creation. 40. There exists relatively significant donor aid for all four sectors inthe form o f investment projects, though many of these programs are on the verge o f completion. Despite the substantial amount of donor assistance allocated to the some of these sectors, the CEA analysis has shown that this i s still inadequate giventhe serious shortcomings ofthe sectors. Thus, more support i sneeded. 41, Faced with the large number of donors to the four sectors and the relatively low total DP support (with respect to the needs of each sector as identifiedby the CEA), and in line with the new trends in development assistance and the emerging emphasis on cross-sectoral, holistic programs, the GoG explored possibilities for further financing; this has resulted in the development o f the NREG Program. The multi-donor Program will provide harmonizedbudget support to encourage institutional and policy reform - as well as assistance to the artisanal sector and support to civil society- in the forestry and wildlife, mining, and environmentalprotection sectors. Tentative approximations o f DP commitments to the programare estimated at US$20millionperyear. - 7 - 1Introduction Backgroundandcontext 1. Ghana's economy is expanding at the commendable GDP growth rate of about 6 percent, while fiscal deficit, debt, and inflation have all beenreduced. As a result, Ghana has made considerable progress in laying the foundation for achieving poverty reduction and attaining the status of a middle- income country within a reasonable period of time. The Growth and Poverty Reduction Strategy (GPRS 11) currently under implementation focuses on creating a setting conducive to accelerating the present growth rate from 6 to 8 percent. Under certain conditions (GoG 2005 [GPRS 111,xix-xx) this would allow Ghana to achieve the status of middle-income country by2015. 2. Environmentaland natural resource depletion could present a major obstacle to fulfilling Ghana's growth potential.Environmental and naturalresources are the major wealth assets for Ghana. Economic growth has been concentrated in a few natural resourcdependent sectors; most of the population's livelihoods depend on the country's natural resource base. However, natural resources are diminishingat an alarming rate. Recent estimatesof the cost of degradation suggest that an equivalent of 9.6 percent of GDP i s lost annually through unsustainable management o f the country's natural wealth (forests and land resources), as well as from health costs related to urban environmental problems (water supply and sanitation, and indoor and outdoor air pollution).' Environmental accounting analyses (World Bank 2006) estimate that the per capita current genuine savings rate2for Ghana i s in fact negative, thus compromising the capacity o f the country to fulfill and sustain its full potential for growth. Under reasonable assumption^,^ the estimated costs of environmental and natural resource degradation are reducingby approximately 1percentagepoint the potential for economic growth inthe ~ountry.~ 3. A pressing need exists to rethink the modalities to support the environment and natural resourcemanagement(ENRM)sector in Ghana. ENRMhas beeninconsistentlyconsidered incountry priorities and policy reforms in the recent past. In addition, considerable changes are under way in the architecture of development assistance to support national priorities. A shift i s occurring toward budgetary support and sector-wide programs to align with country priorities, strengthen country systems, and reduce the transaction costs of dealing with multiplepartners and projects. This shift has implications for addressing environmental issues as, historically, environmental issues were addressed primarily through projects. Inlight o f this new approach, the Government of Ghana and development partners have considered how best to deal with these issues and have jointly developed a joint natural resources and environmental governance budget support operation as a responseto the findings inthe CEA.. 4. Analytical work to assess the costs of natural resource depletion in Ghana has renewed interest in ENRM issues. During the presentation of the results of the Economic and Sector Work (ESW) on Natural Resource Management and Growth, the GoG, represented by the Minister o f Finance, expressed the need for concrete proposals to address environmental degradation. The Country Environmental Analysis (CEA) has been formulated in response to that request. The CEA builds on the existing ESW to fill information gaps, analyzing previously unaddressed issues such as sustainable land managementor mineral revenues. 'See Appendix 1for how this figure was reached. Genuine savings i s an indicator that measures the true savings rate in an economy by taking into account investment inhuman capital as well as depletion o f natural resources. If the savings rate for a country i s negative, then the future level o f economic welfare will decline. If it is positive, the country's management o f a growing portfolio o f assets will produce new wealth (World Bank et al. 2006). Real returnon investment equivalent to 7percent, and resource sectors makingup 30percent of output. See Chapter 2 for more details. -8- Objectivesand scope 5. The main objective of the Ghana CEA is to assist the G o G and the DPs in finding practical management, institutional, and policy solutions to address the issues of natural resource management, environmental degradation and sustainability o f growth. More specifically, the CEA aims to (a) analyze the underlying causes of environmental degradation in the sectors that underpin economic growth in Ghana, (b) propose a comprehensive set o f policy, institutional, and management recommendations to address the causes of degradation, and (c) identify appropriateFnancing instruments (e.g. projects, sector programs, direct budgetary support) for the implementation of the recommended actions. 6. The CEA seeks to: Better understandthe dynamics of the environmentaland natural resource challenges; 0 Highlight institutional and implementation failures that are contributing to environmental degradation; 0 Helpidentify the gaps incountrypolicies, programs, andinstitutions; and 0 Develop practical measuresto address the challenges. 7. The CEA focuses on four key sectorshatural assets that are critical for both growth and poverty reduction in Ghana: forestry and wildlife, mining, land resources, and the urban environment (water supply, and sanitation and waste management). The four selected sectors are the major engines of economic growth inGhanabutalso the sectors most seriously affected by environmental degradation and those with the most severe social andpoverty implications. Other sectordassets (such as fisheries or water resources) and other environmental considerations (such as the role of energy or transport in growth, the impact of future foreign private sector investment-e.g. "China effect," or the implications of climate change) are not addressedby this study, as these have been addressedinthe 2006 ESWor may constitute areas for further analyticalwork inthe future.The CEA is infact not conceived as a comprehensive "state of the environment" report and and so does not address all possible environmental or natural resource aspects. Rather, the CEA identifies priority issues in specific, high-growth sectors that are illustrative o f issues faced by other NRE sectors. For these reasons, the CEA did not specifically address the issues of wetlands and freshwater, coastal, and marineresources. 8. The context in which the CEA was developed has changed since its inception. The chapters o f the CEA concerning the four different sectors were initially written separately from one another, with little consideration o f the overarching natural resources and environment (NRE) issues common to all four sectors. Duringthe later stages of the CEA, there came to be increased attention to the importance of cross-cutting NRE governance, greater recognition o f the need to harmonize across DPs and align with Government priorities (as marked by the Ghana Partnership Strategy and the resultant Ghana Joint Assistance Strategy), and a move towards budget support. Despite this later shift in context - part o f which the CEA helped engineer - the CEA's contents in large part reflect the circumstances at the time the analysis was started. The CEA was largelywritten before September 2006 buthas been updated since to reflect more recent developments, such as the preparation o f a multi-donor natural resources and environmental governance sector budget support. 9. The CEA has been revised and updated when possible to reflect these contextual changes. The need for a more integrated cross-sectoral approach to NRE governance emerged from the CEA and other analytical works such as the Ghana Environment Sector Study (GESS). In line with this view, the seventh and final chapter to the CEA clearly brings out the linkages between the different sectors and summarizes the cross-cutting recommendations for policy and institutional reforms, including increased cross-sectoral coordination and cooperation. An initial version of the CEA was reviewed by the concerned MDAsof the GoG. As best as possible, their feedback i s reflected inthe body o f the CEA. - 9 - 10. The GESS is a complement to the CEA, assessing the institutional capacities for inter- sectoralNRE managementwhere the CEA leaves off. The objective o f the GESS was specifically to review the existing processes for inter-sectoral environmental mainstreaming, going above and beyond the institutional analysis provided by the CEA. Specifically, the study consists of an organizational and institutional analysis of the EPA, an assessment of environmental governance and management capacities at decentralized levels, and an examination of environmental monitoring and information management systems. The findings of the GESS included recommendations for the establishment o f environmental governance and management authority within the Ministry for Local Government, Rural Development and Environment (MLGRDE), establishing inter-ministerial committees for cross-sectoral coordination on NREissues, and strengtheningdecentralized environmental committees. 11. The CEA provides the analytical foundations for further actions related to NRE governance. The CEA has beena key instrument for helpingto carry out the due diligence requirements o f Development Policy Lending (DPL) operations, including the Poverty Reduction Strategy Credit (PRSC) as required in the World Bank's Operational Policy OP 8.60. Most notably, the CEA and the GESS have served as a springboard for the upcoming Natural Resources and Environmental Governance (NREG) sectorbudget support, which was formulated inresponseto these two analyses. Impacts and linkageswith ongoing initiatives 12. The CEA strengthens the policy dialogue and decision-making processes between the government and DPs on environmentaland natural resource managementissues. Ithas strengthened the interest of the Ministry o f Finance and Economic Planning (MoFEP) in NRE management, and has led MoFEP to accept the cost estimates of environmental degradation and the impact on future growth, Environment has thus been brought to the Government's agenda as an essential issue to address. The CEA further mobilized the ENRMdialogue betweenDPs involvedinthe Multi-Donor Budgetary Support (MDBS) Group and the Government by providing concrete inputs to the MDBSPRSC discussion. The CEA was prepared in parallel to the MDBS group's preparation of a new Joint Assistance Strategy to Ghana (G-JAS), and provided input to the Consultative Group meeting in June 2006 - and thus to the discussions on the G-JAS and to the Performance Assessment Framework for the implementation o f the budget support. The G-JAS has a substantial chapter on environment reflecting the findings of the CEA: the environment as a key priority for development is as such accepted at the highest level of the donor community. 13. The direct and immediate impact of the CEA can berecognized by the fact that the MDBSPRSC matrix for PRSC IV has incorporated one of the measures recommended inthe CEA as its trigger for the forestry sector. The MDBS PAF 2006 and the PRSC V have also drawn from the findings o f the CEA: they both include a target to develop a financial and policy framework for the Forestry Commission (in PRSC V, this i s also a trigger). The CEA will continue to provide inputs during the reviewing and renegotiationof future development strategies, such as the next MDBSPRSC and GoG GPRS. 14. The CEA complements and supportsa number of ongoing governmentaland DP initiatives by providing inputsto the implementation of the new MiningLaw, and informing the discussion on the minerals policy, the National E M & SEA Project o f the Environmental Protection Agency (EPA), the MiningSector Support Program, forest sector reforms, public sector reforms, and landreforms. Potential synergies exist with other initiatives such as the aforementioned RNE/High Commission of CanadaAJNDP-supported GESS, the USAID work on Environmental Threats and Opportunities Assessment (ETOA) on Biodiversity andForestry, and the DFID/CIDA work on land. 15. The upcoming Natural Resources and Environmental Governance (NREG) Program is a direct outgrowth of the CEA. The CEA has played the important role of demonstrating the economic significance of engaging in NRE governance issues and the need for greater dialogue within and across the NRE sectors. Indoing so, the CEA generated interest indevelopingan umbrella program focused on - 10- good governance - the joint NREG Program - rather than developing multiple sectoral projects. The Program will focus on regulatory agencies, public financial management, artisanal activities related to mining, forestry, and wildlife, strengthening civil society capacities, and linkingwith global governance initiatives to which Ghana i s committed. The analysis provided by the CEA has guided the development of the policy matrices o f the NREGProgram related to mining, forestry and wildlife, and environmental protection, and has provided a starting point for the fourth cross-sectoral policy matrix. 16. Finally, the CEA, and particularly the chapter on land, supports the approach and the objectives of TerrAfrica, a regional multipartner initiative aimed at enabling the scaling up o f sustainable land management (SLM)in Sub-Saharan Africa. Inline with the objectives o f TerrAfrica, the CEA will help to identify, generate, and disseminate targeted knowledge that supports decision making, informs policy making, and guides investment decisions inSLM. Methodology and Approach 17. The CEA has been prepared under the umbrella of and in collaboration with the ENRM Sector Group (the group of donors that coordinate the development partners' support to the environment and natural resource sector in Ghana), with the financial support of the Agence Frangaise de DCveloppement (AFD)andthe RoyalNetherlands Embassy (RNE). 18. The analytical framework for this CEA i s basedon three types of analyses usingbothprimary and secondary data sources: 0 Policy, legislative, and regulatory analysis. This includes taking stock o f existing laws, policies, and regulations as well as assessing their effectiveness and relevance. 0 Assessment of institutional capacity and constraints. Included i s an assessment of the environmental management capacity of public agencies at national, subnational, and district levels. This is based on the review of existing capacity in terms o f plans, processes, and personnel for environmentalmanagement inkey institutions. 0 Public Environmental ExpendituresReview. This review includes a thorough analysis of expenditures that support environment and natural resource conservation objectives, as well as trends in environmental expenditures and ratios over time, and tax and non-tax revenues of keynaturalresource/environmental ministries, departments, and agencies. 19. For each sector, the CEA provides (a) a general overview of the sector, its contribution to growth, and the scope and causes of degradation, (b) an analysis of the policy, legislative, and institutional framework, highlighting how the deficiencies in these frameworks contribute to the degradation of the asset, and (c) a set o f prioritized recommendations ('jointly agreed upon with the government, the DPs, and other stakeholders). Recommendations for each sector are organized along four categories: (a) policy and regulatory improvements (to create an enabling environment for implementation), (b) institutional capacity building (building sufficient capacity and providing the proper institutional arrangements to perform well), (c) investment (to fill financing gaps ininfrastructure, technology, or key outputs), and (d) knowledge management, monitoring, and evaluation (to inform policy and regulatory decision making, and to monitor performance). The CEA recommendations will be tailored to address both short-term and longer term strategic directions. 20. The CEA also presents an overview of the existing and future DP financing o f the NRE sectors in an initial attempt to identify the alignment of donor assistance with the CEA findings. This includes the upcoming NREGbudget support Program. 21. The preparation of the CEA involved a series of consultations with Government representatives, DPs, and civil society representatives. A first fact-finding mission occurred inOctober 2005 to receive the endorsement of the Government for the CEA. The mission met with various ministries and agencies, - 11- including the Environment Protection Agency (EPA), the Minister of Food and Agriculture, the Minister o f Land, Forestry, and Mines, as well as with a number o f civil society organizations. A further consultation mission occurred in March 2006 to present and discuss the first set of findings and recommendations o f the draft CEA with GoG and civil society. Duringthis time, an NGO workshop was held to review the draft matrices for each sector and to establish a dialogue between stakeholders regarding the CEA. NGOs present at this workshop include CARE International, the Africa Economic Journalists Forum, the Wassa West Association of Communities Affected by Mining, Land for Life, and Conservation International, among many others. Finally, a third mission took place in May 2006 to present the draft CEA report and further discuss the preliminary results with GoG and civil society. Workshops were held throughout the month of May with all relevant stakeholders. All of these meetings and workshops reveal a serious commitment to consulting systematically with all stakeholders duringthe stages of CEA preparation. 22. The GoG i s strongly committed to the CEA through the Minister o f Finance, who i s both a champion o f the CEA and the former Ministerof Environment and Science (MES).5 Structure of the CEA Report 23. The report i s divided into seven chapters, including the introduction. Chapter 2 highlights the linkagebetween economic growth and its implications for natural resource management inGhana. 24. Chapters 3 to 6 present the analysis for the four sectors: 0 Forests and wildlife,which addresses management of forest reserves and wildlife protected areas, and the "off reserve" areas (Chapter 3). 0 Mining, which analyzes the environmental consequences arising from both large-scale miningand small-scale artisanal miners, and the prospects for institutional strengthening of environmentalregulation (Chapter 4). 0 Landresources,which analyzes the policy, institutional, and incentivebarriers that prevent sustainable solutions from being adopted, and considers how to improve policy coherence and cooperation mechanisms in an area that demands cross-sectoral collaboration (Chapter 5). 0 Urban environment. This section deals with two subsectors that are important for environmental health in urban areas: water and sanitation and waste management (Chapter 6)* At the end of each chapter, key recommendations as well as more detailed recommendations are provided. 25. Chapter 7 presents key cross-cutting recommendations relevant to improving environmental policy management ingeneral, the inclusion of which i s a reflection o f the changing institutional context inwhich the CEA was written. At the beginningof the analysis, the sectors were looked at separately, a fact that may be apparent when examining Chapters 3 - 6. As recognition of the need for broader NRE governance emerged duringthe course of the CEA, Chapter 7 was added to address cross-cutting issues. ~~ On April 27,2006 the President John Agyekum Kufour announced a restructured government list, which realigned and re-designated ministerial portfolios. In this restructured government list, the ministerial portfolio o f Environment has been attached to the Ministry o f Local Government and Rural Development, now Ministry o f Local Government, Rural Development and Environment (MLGRDE). Most o f the institutional analysis o f the presentCEA has beenconductedbefore this institutional restructuring. Therefore, the various chapters oftenrefer to the former Ministry o fEnvironment. - 12- The chapter concludes by discussing existing and projected donor assistanceineach sector, including the upcomingNREGProgram. - 13 - 2 NaturalResources and Growth in Ghana Background 1. Since embarking on economic reforms in the mid-l980s, Ghana has made considerable progress in laying the foundations for sustainable growth and poverty reduction. In fact, Ghana's growth performance over the past two decades has been modest but relatively good compared with that o f other West African countries (see Figure 2-1 and Table 2-1 below). Growth rates in recent years have been particularly strong, reaching the 6-7% range in 2006. In order to demonstrate its strong commitment to sustainable growth and poverty reduction, the Government o f Ghana (GoG) has included the growth agenda in a number of initiatives. For example, accelerated growth i s an important objective o f Ghana's Vision 2020 Plans and in its moving toward achieving the Millennium Development Goals targets. In addition, in its Poverty Reduction Strategies (GPRS Iand 11) the GoG i s hrther committed to achieving faster poverty reduction, and accelerated growth i s set to play a key role. Figure 2-1: Ghana, Real GDP per capita (1970-2004) 350 300 - -14- Table 2-1: Comparison of Average annualized per capita growth rates of West African countries (1980-2002) 1980-89 1990-99 2000-02 1980-2002 Benin 0.0 1.6 2.9 1.1 BurkinaFaso 1.1 1.3 1.1 1.2 Cameroon 1.1 -2.2 2.4 -0.2 Cape Verde 4.6 2.8 2.3 3.4 Cote d'Ivoire -3.8 -0.5 -3.4 -2.3 Equatorial Guinea -1.9 17.2 20.9 13.4 Gambia, The 0.3 -0.4 -0.3 -0.1 Ghana -1.3 1.6 2.4 0.5 Guinea 1.6 1.5 1.1 1.4 Guinea-Bissau 0.2 -0.9 -2.6 -0.6 Liberia -7.1 -1.3 6.7 -2.8 Mali -1.9 1.o 2.3 -0.1 Mauritania -0.2 1.o 1.4 0.5 Niger -3.0 -1.5 -0.3 -2.0 Nigeria -2.1 0.2 -0.3 -0.9 Slo Tom6 andPrincipe -1.0 -0.8 1.6 -0.4 Senegal -0.4 0.6 1.5 0.3 Sierra Leone -1.0 -6.4 3.1 -2.8 Togo -0.6 -1.0 -1.9 -0.9 ~ ~~ Source: World Development Indicators 2004 2. Inlight ofthe requirements ofthe MillenniumDevelopmentGoals, the GhanaPoverty Reduction Strategy (GPRS I), and the Growth and Poverty Reduction Strategy (GPRS II), the need for the Ghanaian economy to grow faster than it has ever done cannot be overstated. But at the same time, for this growth to be sustainable inthe longrun, it has to be accompanied by constant efforts to improve productivity and strengthen the management o fnaturalresources. 3. The sustainability of continued economic growth and expansion in Ghana hinges on key actions aimed at enhancing the efficiency o f investment and raising productivity throughout the economy. At present, growth i s being driven primarily by factor accumulation, as reflected in a rising investment to GDP ratio; increases in productivity are having a negligible effect (World Bank 2006c [Ghana PRSC IV]). This trend cannot be sustained, particularly because growth driven exclusively by capital accumulation loses momentumdue to the declining marginal productivity o f capital. 4. This is just one side of the story. Some 50 percent of GDP in Ghana is derived from the exploitation of renewable naturalresources inthe agriculture, fisheries, and forestry sectors. The output of these sectors i s further dependent on the productivity o f key naturalresources including land, soils, water, and forests combined with associatedhuman, capital, and technical inputs. 5. InGhana, as more capital was commandeered for achievinggrowth, the need arose to utilize the country's rich natural resources. Growth therefore led to larger export volumes of cocoa, timber, and minerals. This was done in an unsustainable manner, which not only reduces current output from these sectors (including revenues), but also jeopardizes future growth and human development potential. Sustainable growth in resource-based economies requires that living resources be exploited at a sustainable rate, when rents from exhaustible resources are invested in other assets-as just noted; however, it i s important that any new investments beproductive. 6. Itis withinthis context that the Country Environmental Analysis presents one ofthe first attempts in Ghana to quantify and monetize the environmental cost of economic growth across a wide range of environmental issues. Despite the difficulties involved in assigning monetary costs to environmental - 1 5 - degradation, these estimates can be a powerful means of raising awareness about environmental issues and facilitating progress toward sustainable development. It i s far easier for decision makers to incorporate and prioritize the environment when issues can be cast in clear economic terms. The aim therefore i s to create a baseline against which the government can measure the environmental consequences of its growth strategies and take policy decisions that are likely to have implications for achieving sustainable growth. Where is the NaturalWealth of Ghana? 7. The economic literature has traditionally focused on produced capital such as buildings, machinery, equipment, and infrastructure. Over the years, recognitionhas increased about the importance of extending these measures to account for exhaustible resources, renewable resources, and agricultural land. Added to the list more recently i s intangible capital, which encompasses raw labor, human capital (the stock of human skills and know-how), social capital, and the quality of institutions. Increasingly emphasized i s the strong link between changes in wealth and the sustainability o f development-if a country (or a household, for that matter) i s runningdown its assets, it i s not on a sustainablepath (see Box 2-1; World Bank 2006a).Therefore, for the link to hold, the notion of wealth must be truly comprehensive. 8. The prospects for economic development, sustainable rural livelihoods, and poverty reduction in Ghana are highly dependent on natural resources. Rural households rely on soil and other natural resources for their livelihoods; fisheries and wildlife provide important sources of protein inthe Ghanaian diets; urban economic activities depend on reliable hydroelectric power and fuel; the wood-processing industry(the main manufacturing sector in Ghana) depends on timber; and the emerging tourism sector relies on cultural and natural assets. 9. Natural resources are also indispensable for most of the economic sectors o f the country. In particular, more than half of Ghana's GDP i s derivedfrom the following sectors that are closely related to the natural resource base: agriculture and livestock (29 percent), forestry and wood processing (7 percent), fisheries (4 percent), electricity and water (3 percent), mining (5 percent), and tourism (5 percent). Therefore, Ghana's natural resource base accounts for a vast portion o f the country's economy andprovides goods and services fundamental to rural andurban livelihoods. 10. Despite their social and economic roles, Ghana's natural resources are overexploitedand continue to decline in both quantity and quality. Inappropriate crop production practices, mining, and wood processing are adversely affecting forests and savanna woodlands. Ongoing soil erosion and a decline in soil fertility undermine food and agricultural production. Human activities such as salt winning are degrading wetlands. Silt accumulation and alien species threaten goods and services provided by Lake Volta and other hydrological systems. 11. Further compounding the situation in recent years is the rapid urbanization of the economy without related improvements in infrastructure. This has contributed to additional depletion of the environmental services that nature provides. Inadequate housing, water supply, and sanitation; rising congestion and air pollution from automobiles, especially in large cities; and indoor pollution in rural areas are serious environmental concerns that are having a negative impact on both the quality o f life and the quality of growth. - 16- Box 2-1: Where is the Wealth of Nations? Natural capital constitutes a quarter o f total wealth in low-income countries, greater than the share o f produced capital. This suggests that better management o f ecosystems and natural resources will be important to sustaining development while these countries build their infrastructure and human and institutional capital. Particularly noteworthy is the share o f cropland andpastureland inthe natural wealth o fpoor countries-at nearly 70 percent, this argues for a strong focus on efforts to sustain soil quality. This new approach to capital suggests that the key role of the management o f wealth is through savings and investments. I t also provides a comprehensive measure o f changes inwealth, a key indicator o f sustainability. There are important examples o f resource-dependent countries, such as Botswana, that have usedtheir natural resources to underpin impressive rates of growth. In addition, the research finds that the value of natural capital per person actually tends to rise with income when we look across countries-this contradicts the received wisdom that development necessarily entails the depletion o fthe environment. However, the figures suggest that, per capita, most low-income countries have experienced declines inboth total and natural capital. This is bad news not only from an environmental point o f view, but also from a broader development perspective. Growth i s essential if developing countries are to meet the Millennium Development Goals by 2015. Growth, however, will be illusory ifit is based on mining soils and depleting fisheries and forests. Source: WorldBank 2006a. Value ofDepletion andDegradation 12. Ghana's natural resources, upon which so much o f the country's economic activity and the population's livelihood depend, are disappearing at an alarming rate. More than 50 percent o f the original forest area has been converted to agricultural land by slash-and-burn clearing practices. Despite cocoa land expansion, productivity has declined because of rampant soil erosion. Fish, timber, and nontimber forest product stocks are decreasing. Coastal towns are facing severe water shortages during the dry season, hydropower capacity i s dropping, and bilharzias have spread around the Volta Lake region. Wildlife populations and biodiversity are in serious decline, and many species face extinction. Health- related pollution issues-both indoor and outdoor air pollution, water, and sanitation-have serious implications for the well-being of the majority of the population and in the long run may affect their contribution to economic growth. All o f these consequencesmight lower Ghana's GDP growth inthe near future. From a broader view, a measure of Ghana's productive base interms of wealth that includes not only growth inGDP, but also human, natural, and social capital, makes Ghana's recent economic growth achievements look muchless impressive and much less sustainable. New Estimates of Cost of Natural Resource and Environmental Degradation 13. The CEA extended the earlier estimates of costs of natural resource degradation to also cover costs of environmental health effects. The mean estimated annual cost of natural resource and environmental degradation is nearly U S $730 million or 9.6 percent of GDP in2003. This cost represents almost one half of Ghana's US$1.5 billion annual Overseas Development Assistance (ODA). The degradation of agricultural soils and forests and savanna woodlands costs at least US$405 million annually (5.3 percent o f Ghana's annual GDP). 14. Environmental health effects account for nearly U S $325 million (or about 4 percent of GDP) from (a) urban air pollution (US$ 30 million), (b) inadequate potable water supply, sanitation, and hygiene (US$ 180 million), and (c) indoor air pollution (US$ll5 million). While health effects from miningpollution and vector-borne diseases, such as malaria, are a concern and mightbe severe in some locations, they are often difficult to estimate. The estimated health costs are therefore understating the total magnitude of cost. - 17- 15. The costs of environmental damage are distributedunevenlyacrossthe population. The estimated cost of urban air pollution (PMIO) of US$9 per year (80,000 cedis) i s for cities with more than 90 thousand inhabitants. Hygienic practices, and to some extent inadequate potable water supply and sanitation, are affecting most of the population and causing unnecessary diarrheal illness and child mortality; their annual cost i s nearly 80,000 cedis (US$ 9) per person per year. Indoor air pollution from solid fuels i s a burdenon the urban and rural population, and costs an estimated 55,000 cedis (US$ 6) per person per year. So while the total annual cost of urban air pollution i s substantially less than the cost of the other two major environmental health risks, the cost per person exposed is as high as for water, sanitation, andhygiene. Figure 2-2: Annual Cost of Degradation(millionsUS$) 300 250 200 11) v) 3 -.-=150 I- 100 50 0 Water & Outdoor air Indoor air Agricultural Timber Sanitation pollution pollution Land Source: WorldBank (2005a) and WorldBank 2006 16. Inthisnew calculation, the magnitude of depletion is almost three times the level calculated in the National Environmental Action Plan (NEAP) 10 years ago. Inaddition, the majority o f the cost, 3.5 percent of GDP, i s now seen as coming from forest depletion. Ironically, mucho f the forest depletion has occurred inside reserves that were established for preservation purposes 50 years ago. The next biggest cost i s that of inadequatewater supply, sanitation, and hygiene, followed by damage to agricultural lands. 17. The depletion o fthese natural assets is interrelated and self-perpetuating. For example, a scarcity of fish stocks usually results in increased pressure on wildlife. Similarly, the loss of soil fertility often leads farmers to clear forests and savanna woodlands in search of productive land. A growing population can fkrther exacerbatethe ongoing depletion of naturalresourcesand the associatedeconomic losses. How Much is Ghana Saving Per Capita? 18. Two of the most important issues for developing countries are how to stimulate investment, and how to bring about an increase in the level o f savings to fund increased investment. Savings are thus a core aspect of economic growth and development. Economic theory predicts that increased total savings (from domestic or foreign savers) will lead to higher investment and higher growth. Without the creation of a surplus for investment, there is no way countries can escape a state of low-level subsistence. The situation i s further complicated by the fact that poor countries are dependent on resources, and depletion of natural resources i s often not accounted for in the standard measurement o f savings. It should, - 1 8 - however, be emphasized that it i s not only the quantity of investment that i s important, but also the quality of investment. 19. The standard national accounts measure the change in a country's wealth by focusing solely on produced assets. A country's provision for the future is measured by its gross national savings, which represents the total amount o f produced output that i s not consumed. Gross national savings, however, can say little about sustainable development, since assets depreciate over time (World Bank 2006a). Net national savings (gross national savings minus depreciation of fixed capital) takes us one step closer to measuring sustainability. But a more comprehensive way o f measuring sustainability is to adjust net saving for the accumulatioddepletion of other assets-human capital, the environment, and natural resources-that underpin development. The "adjusted" or "genuine" savings indicator provides a much broader indicator of sustainability by valuing changes in natural resources, environmental quality, and human capital, in addition to the traditional measure o f changes in produced assets provided by net savings. It measures the true rate of savings in an economy after taking into account investments in human capital, depletionofnatural resources, and damage causedby pollution. Box 2-2: Calculationof Genuine Savings Gross national saving is calculated as the difference betweenthe gross national income (GNI) and public andprivate consumption and net current transfers. From this the consumption o f fixed capital i s subtracted, giving the traditional measure o f net national saving. Consumption o f fixed capital represents the replacement value o f capital used up inthe process o f production. Inthe traditional measure ofnet national saving only thatportion oftotal expenditure oneducationthat goes toward fixed capital (such as school buildings) is included as a part o f saving; the rest is treated as consumption. From the perspective o f broadening the measure o f wealth this i s clearly unsatisfactory. Therefore, as an approximation, current operating expenditures on education, including wages and salaries and excluding capital investments in buildings and equipment,are added to net national saving. Natural resource depletion i s then subtracted. The value o f resource depletion is calculated as the total rents on resource extraction and harvest, where rents are estimated as the difference between the value o fproduction at world prices and total costs of production, including depreciation o f fixed capital and return on capital. The energy resources include oil, natural gas, and coal, while metals and minerals include bauxite, copper, gold, iron ore, lead, nickel, phosphate, silver, tin, and zinc. Next is the adjustment for damages from carbon dioxide, using a figure for marginal global damages o f $20 (1995 prices) per metric ton o f carbon emitted. This represents the present value of marginal damages to crops, infrastructure, and human health over the time that emitted carbon dioxide resides in the atmosphere-over 100 years. The genuine saving calculation also includes the value of damages from air pollution. Pollution damages can enter the national accounts in several ways. While, in theory, pollution damage to produced assets is included in depreciation figures, inpractice, most statistical systems are not detailed enough to capture this. For example, acid rain damages to building materials are rarely fully accounted. The effects of pollution on output-damage to crops, for example-are already included inthe standard national accounts, although not explicitly. Finally, the value o f health damages arising from particulate matter pollution i s deducted. Particulate air pollution is capable of penetrating deep into the respiratory tract and causing damage, including premature mortality. The population-weighted average level o f PMlO (particulate matter less than 10 microns indiameter) is estimated for all cities in each country with a population in excess o f 100,000. Particulate emission damage is calculated as the willingness to pay to reduce the risk o f mortality attributable to PM10. The net result o f all these adjustments i s genuine saving. Source: WorldBank, 2006a 20. Usinga more comprehensive assessment of only naturalresource depletion, the recent Economic and Sector Work (ESW), "Natural Resources Management and Growth Sustainability," in conjunction - 19- with the Costs of EnvironmentalDegradation study that assessedhealth costs from pollution, leads to the conclusionthat wealth accumulation i s infact closer to 12.3 percent of GDP.6 21. Table 2- provides an estimation of genuine savings for Ghana. It shows the detailed accounting o f the change inwealth per capita in Ghana, accounting for a 1.7 percent population growth rate per year. The left-hand column shows the assets that compose tangible wealth, totaling tangible wealth per capita. The right-hand columnbreaks out the accounting of adjustednet saving. Grossnational saving is addedto education expenditures to yield total saving effort; consumption o f fixed capital and natural resource depletion are then subtracted from this total to yield the net saving per Ghanaian, US$16. The population growth rate i s then multipliedby tangible wealth and the result subtracted from adjusted net saving to yield the net change inwealth, -US$18 per capita or 18.8 percent o f GDP. Eventhis negative "genuine" savings are somewhat overstated as it does not take into account the health damages from air pollution, especially particulate matter. The rate of change of total real wealth (US$16/US$2,022 = 0.8 percent) i s less than the population growth rate.7 The Ghanaian example shows that it i s indeed possible to have positive genuine savings intotal, but decliningwealth per person. Table 2-2: Accountingfor ChangesinWealth Per CapitainGhana TangibleWealth US$ per capita Adjusted netsaving US$ per capita % GNI Subsoil assets 65 Gross National Saving 40 28.1 Timber resources 290 Educational 7 2.8 expenditure Consumption fixed 19 8.7 capital NTFR 76 Energy depletion 0 0.1 Protectedareas 7 Mineral depletion 4 0.2 Cropland 855 Net forest depletion 8 2.3 Pastureland 43 Particulate emission 0.3 damage Producedcapital 686 Total tangible wealth 2,022 Genuine saving 16 18.8 Population growth 1.70% Change inwealth per -18 capita Source: World Bank (2006a, b). Note: Tangiblewealth estimates arefor 2000; adjustednet savings numbers arefor 2004 The study included degradation of five types o f natural assets: agricultural soils, forests and savanna woodlands, coastal fisheries, wildlife resources, and Lake Volta's environment (World Bank 2005). See Appendix 1 for an overview o f how the costs of environmental and natural asset degradation were computed. The rationale behind the adjustment for population growth is that the existing wealth per person declines because it i s spread over the population increment. -20- Figure 2-3: Real Savingsversus Genuine SavingsinGhana 4 0 3 0 2 0 t I O f o ,." -1 0 .2 0 - 3 0 22. In effect, summarizing the above analysis, one can say that growth sustainability is at risk because the country's total wealth i s diminishing. Support for this also comes from both theoretical and empirical literature, which directly links savings to future welfare (Hamilton and Withagen 2004; World Bank 2006a). The striking reality of this analysis i s especially important for developing countries like Ghana-the processes of accumulating produced assets and depleting natural resources i s inextricably linked with the welfare of these countries. Conclusion 23. Ghana i s endowed with a rich, renewable natural resource base. This base has contributed significantly to driving economic growth inthe past. Our analysis shows that the exploitation of Ghana's resources has been unsustainable. As a result, it i s now estimated that the cost o f natural resource and environmental degradation in Ghana today i s on the order of about 9.6 percent o f GDP. This i s indeed alarming, and it i s clear that current unsustainable management practices will continue to impede growth and erode Ghana's natural assets. At this rate, productivity i s likely to fall even more dramatically because of poor natural resource management and governance. It i s essential that key decision makers in Ghana respondto this challenge. 24. Current projections of sectoral contributions to GDP in Ghana's policy documents assume that natural assets will continue to play a significant part in its economic growth. The national accounting systems do not factor in the negative economic effects of natural resource degradation. Data from the Ministry o f Finance suggest that wealth accumulation i s 28 percent of GDP, which i s rather misleading in the context of sustainable development. Inother words, wealth accumulation i s being overestimated inthe country. As described above, the actual "genuine" savings in Ghana o f 12.3 percent are well below the official savings estimatesifresource depletion i s taken into account. 25. Since naturalresource depletion i s a limitingfactor for sustained economic growth, it follows that better natural resource management can contribute to growth in Ghana. More specifically, under reasonable assumptions,' in an economy such as Ghana's, for each percentage point o f genuine savings * Ifthe realreturnon investment were 7 percent andresource sectors make up 30 percent of output, each 1percent increase ingenuine saving would boost the rate of growth o f net income by 0.1 percent - 21 - loss, the rate o f growth i s decreased by 0.1 percent. Inpractical terms, this means that environmental and natural resource depletion in Ghana (which accounts for 9.6 percent o f GDP) i s reducing by roughly 1 percent the potential for economic growth inthe country. 26. With a demographic growthrate o f about 2 percent, hture streams o f depletioncosts are likely to increase over time if nothing i s done. Meanwhile, flows o f benefits will decrease, and natural resources will be exhausted. Consequently, the government would be taking an extremely large risk if it did not shift policy to include natural resource depletion costs and, by extension, improve the rate o f wealth accumulation. 27. There is an urgent need for Ghana's policy makers to take action and stem this trend. As will be discussed inthe next chapters, better management o f key natural resources can significantly contribute to future growth. Infact, our estimates suggest that Ghana's natural resources contribute twice as much to current social welfare as does produced capital. Policies, regulations, institutions, and incentives across sectors mustbe aligned to ensure sustainable development, or a "positive" genuine savings rate. 28. A clear policy rule links natural resources management with economic growth: targeting a constant positive rate o f genuine savings will yield sustainable growth, even with exhaustible resources. - 22 - 3 Forestry and Wildlife Key Features of the Sector 1. Ghana's forest and wildlife sector is on the brink of major change. Forest and wildlife resources have long been major contributors to Ghana's economic development, formal and informal employment, livelihoods, and export earnings. The highforest zone insouthern Ghana has beenthe main focus of attention: as a natural resource, as a source of fiscal revenues and-through elite capture of the economic rent-a political resource. 2. Long-held assumptions about Ghana's forest wealth are no longer valid. The off-reserve forest has largely gone; future timber supply will increasingly come from plantations; and constrained supply and changing international markets will encourage industry restructuring. Satellite views o f Ghana's southwestern forest areas illustrate the results of the country's historic forestry policies. These policies structure many of the challenges o f environmental management today. The dark areas visible in the satellite image are forest reserves and protected areas, surrounded by "off-reserve" areas, where policy has led to conversion of the forests to agriculture. Estimates o f the remaining closed- canopy, off-reserve forests inthe 1990svaried from 100,000 to 350,000 ha (World Bank, 2006a); satellite imagery clearly shows that the lower estimates are more accurate-remaining off-reserve forests are fragmented and small. Inthe dryer transition zone above Kumasi, bushfires and overexploitation have all but eliminated several forest reserves; in the northern savanna regions, the distinction between reserve and off-reserve i s less dramatic. Inall cases, however, the boundarybetween reserve and off-reserve i s an area of potential conflict over land use. 3. Most forest reserves, and off-reserve areas, remain under a traditional form of land management; around 85 percent of land in Ghana is administered in this way. Traditional authorities (paramountcies) hold the root (allodial) title to the land, and usuhct rights are held by subchiefs and fa mi lie^.^ Traditional authorities and stool" chiefs have rights to a share of benefits from timber royalties and forest lands. Since 1947, forest policy has foreseen the exploitation of off-reserve areas for timber under a licensingregime. Around 45 percent of forest reserves are production forests (meaning they can be logged, using selective harvesting techniques, according to a management plan). However, in the last 15 years, most of the supply ofthe timber industryhas come from off-reserve areas. 4. The land in the national parks (NPs) is not under the allodial title and, in theory, compensation is paid to the relevant stools. Inreality, only two Nps, Mole and Nini-Suhien,are fully compensated. Ghana has a total o f 15 wildlife-protected areas (6 national parks, 6 resource reserves, 2 wildlife sanctuaries, and 1 strict nature reserve), and 5 RAMSAR wetland sites. Compensation is not paid for resource reserves, as the stool (represented by local communities) has conditional access to the forest resources (except possibly timber; in most cases, it has conditional access to wildlife and to land for agriculture). In recent years, potential revenue from future "eco-tourism" and other benefits have been usedto raise expectations of local communities. However, many of the resource reserves will struggle to generate significant income tojustify these claims from tourism alone. Table 3-1: Typology of Forest Areas Typolopy Area Comments Off-reserve 201,000 Off-reserve areas are lands that are currently (or were) forests but where the areas km2 policy presumption i s that these lands would be converted to other use-in 9 Inthe Volta Region, families control land; inthe north, landmanagement is undertaken throughtindama. loThe stool is both a symbol o f a social unit and the unityitself. The term refers not only to the administrative structure but to the actual chair on which a chief sits. It represents the source o f authority and legitimacy o f the chief (or head o f family). -23- particular, agriculture. This includes 5,000 kmzo f unreserved forests, 60,000 &o f buskfallow, 71,000 kmzo f bush fallow 36,000 lanzo f unimproved pasture, and 29,000 lanzo ftree and annual cropland. Forest 26,000 These are areas that have been designated as forest reserves where no farming reserves km2 i s allowed (except for in "admitted" farms, which were usually present at the time o freservation o fthe forest). Dedicated 4 l u l l 2 Dedicated forests are designed to enable communities to manage their own forests forest "reserves" based on approved management plans. They take the form o f patches o f forests, sacred groves, and secondary forests inoff-reserve areas. A dedicated forest management scheme was initiated in 1994. Under a pilot project, two communities were assisted in declaring Dedicated Forests (215 ha & 190 ha) in Fosu District to determine the scheme's feasibility to communities. The results were positive, and draft legislation and a programto promote dedicated forests were formulated in 1997; however, no further action was taken. Sacred unknown Numerous sacred groves are found throughout Ghana. They are managed groves wholly by communities, but they have no legal status and are extremely small inmost instances. Protected 10,500 A protected area is generally a large and relatively undisturbed area of areas km2 outstanding natural value containing representative samples o f major natural (National regions, features, or scenery and containing one or several entire ecosystems; Parks) it is an area not materially altered by man(or reflecting longstanding cultural land management practices). The areas should be accessible to the public, have high recreational, educational, inspirational, and cultural potential o f clear benefit to the local people, the region, and the nation. The highest competent authority, i.e., the Ghana Wildlife Division administers and manages these areas to prevent or eliminate exploitation or intensive occupation in order to maintain them in perpetuity in a natural or near-natural state. Resource 1,664 km2 These areas are o f varying size. They contain habitats managed to guarantee reserves the conditions essential to the well-being o f selected species for the sustained (game production o f wildlife products (meat, timber, pasture, fruits, honey, bamboos, production rattans, medicinal plants, and other nontimber forest products BTFPs]). The reserve) areas are used for cultural practices, tourism, and trophy hunting. Conservation priorities involve the manipulative management o f species and their habitats to ensure the protection and propagation o f the target species, including introduced indigenous and exotic species. Management is to be conducted in such a way as to preserve the areas' natural aspect as far as possible. Other forms o f land use compatible with these goals are allowed. These areas may be managed by a central authority or, through agreement, by other levels o f government, special trusts, or local community institutions as appropriate underthe overall supervisiono f GWD. Forest 26,000 Areas designated as forest reserves allow no farming (except for in"admitted" reserves km2 farms, which were usually present at the time o freservation o fthe forest). Wildlife 66kmz Wildlife sanctuaries can be created on state land or local land. A revenue- sanctuaries sharing mechanism is in place at Agumatsa Wildlife Sanctuary (community 57 percent, FC 23 percent, and Hohoe District Assembly 20 percent). CREMAs 3 0 h Z The Community Resources Management Area is a legally recognized unit o f management capable o f managing the wildlife resources within the defined area. Devolution o f authority to the CREMA from the Executive Committee i s conditional and confers the right to restrict access to the common property and extra-farm resources. This measure provides incentives for sustainable management o f wildlife resources. So far only one CREMA (Amokwasuazo) has received the authority to manage its resources. - 24 - Globally 2,302 km2 GSBAs are legally established areas identified within the existing forest Significant reserve system. They form a potential network o f 30 forest reserves that are Biodiversity proposed for either full (11 reserves) or partial (19 reserves) protection to Area provide global security for floristic diversity. Included in this group are (GSBAs) Southern Dry Forests andthe Provenance ProtectionAreas. Strict nature 385km2 Only one strict nature reserve, Kogyae, is in existence. Originally created reserve from a forest reserve, it was taken over by the WD in 1971 and established as ( S W an IUCNCategory Istrict nature reserve. However, the WD has beenunable to evict a number o f farms and settlements within the reserve. RAMSAR 1,784km2 Six RAMSAR sites are listed as wetland sites o f international importance. Sites Under the RAMSAR convention the contracting parties are generally obligated to include wetland conservation considerations in their national land-use planning. They have undertaken to formulate and implement this planning to promote, as far as possible, "the wise use of wetlands in their territorv.I' * Dating from the 1948 Forest Policy. Sources: WorldBank (2006a); PADP (2000). 5. The biologicaldiversity ofthe forestregionis high, of globalsignificance, andrichinspecies endemic to the area (Burgess et al. 2004; Hawthorne and Abu Juam, 1995). It i s part of the Upper Guinea forest ecosystem from Guinea to Togo, which i s categorized as one o f the eight African biodiversity "hotspots" by Conservation International (Critical Ecosystem Partnership Fund 2000). Burgess et al. (2004) note that that the "relatively well-managed" production forest reserves have considerable value in conservation o f threatened species, and even small areas such as sacred groves can be effective inthe conservation ofrareplant species (Campbell 2005). This has important implicationsfor the regulation of commercial logging insouthwest Ghana inparticular, where the best of the high forest remains. A. Structure ofthe Forest andWildlife Sector inGhana 6. The shape and structure of today's industry is, in part, a consequence of liberal credit availability under the Economic Recovery Program (EW) of the 1980s. Initial ERP investments mainly went into logging and processing capacity. In the post-ERP era, timber-processing capacity increased dramatically, and timber exports peaked in 2000 at around 500,000 m3o f finished product (equivalent to around 1.3 million m3 of logs). In 2001, installed sawmilling capacity" in the wood industry was estimated at 3.4 million m3-around 10 times the level of probable sustainable yield level from forest reserves of about 350-400,000 m3/year (Birikorang 2001; Forestry Commission, internal data). The subsequentintroduction of a log export ban, low and falling stumpagerates, and weaknesses in regulation resulted in the dramatic increase in timber-processing capacity. However, the milling machinery imported was often old and inefficient. This has left a legacy of overcapacity inthe industryo f four to six times sustainable yield and very low conversion rates insawmills-just 36 percent on average, although the best firms achieve rates o f around 70 percent (Birikorang, 2001; Bureau of IntegratedRural Development, 2005). 7. As a result, substantialparts of the timber industry in Ghana are not merely inefficient, but actually value-subtracting. Low log prices-a mix of the log export ban and failure to collect forest taxes-have distorted industrybehavior, and have not created an incentive for the best operators to move to higher value-added processing. Although tertiary processing in Ghana (furniture parts, moldings) may demonstrate Ghanaian manufacturing capacity, policies have made it possible for inefficient operators to stay inplace (Box 3-1). l1Onthe basis o ftwo working shifts. - 25 - Box 3-1: Primary Timber ProcessinginGhana: A Value-Subtracting Industry Sawmilling o f lumber is the most basic processing undertaken in Ghana. However, increases inindustry capacity since the late 1990s are also from an expanded capacity inveneer production. Unfortunately, both sawmilling and veneer production in Ghana are value-subtracting, and only make money for the operators o f the log export ban and because they pay substantially less than world market prices for timber. The data below are based on 2003 mill operating estimates; local and international prices have not altered substantially since then. At domestic logprices At international logprices Sliced veneer Milledlumber Sliced veneer Milledlumber Log price per m3 50 40 155 120 Cost o f processing/m3 260 50 259 50 (Subtotal) total log-processing cost 310 90 414 170 Recoverypercentage (30%) Overhead cost 12.4 2.7 12.4 2.7 Transport cost 1.6 1.6 1.6 1.6 Port handling, bank 9.1 3.6 9.1 3.6 Total economic cost 332.3 97.4 437.0 177.38 Export value (FOB) US$ m3o fproduct 302.50 97.38 302.50 119.11 Net Gain/ Loss -29.8 - 21.7 -134.5 -58.25 By comparison, Ghana could have earned a net value o f US$465 or US$360 from export o f the log equivalent (3m3),for the veneer and lumber grade logs, respectively. Source: Derivedfiom Birikorang (2001). 8. Nontimber forest products (NTFPs) are also extremely important,but much of their value i s not formally recorded, and remains inadequately represented in policy analysis. This i s in part attributable to "timberization" of all aspects of policy formulation and regulation. The NRM ESW study noted that NTFPs are so frequently collected, for both commercial and household purposes, that their economic value may locally outweigh that of timber. Their use i s more than mere subsistence. Wild animal and wild plant exports were valued at US$18 million in 2003 (World Bank 2006a). Recent bushmeat studies have shown that 72 to 82 percent i s traded and 52 percent i s consumed by urban dwellers(Cowlishaw, 2006). Hunters get 72 percent of the final sale price, suggesting highand sustained demand for bushmeat. Attempts to value the national annual trade in bushmeat have produced widely varying values: between US$9 million (Hofmann et al. 1999) and US$200-300 (Ntiamoa-Baidu 1998). No work has been carried out to determine the replacement costs o f these resources. However, the dietary importance of bushmeat as a protein source in Ghana was illustrated by 30-year trend analyses where years of poor fish supply coincided with increased hunting and sharp declines in biomass o f wildlife species (Brashares et al. 2004). 9. Wildlife-based tourism in Ghana is minor and has revenues of around US%2.5 million. Nevertheless, significant opportunities exist for development as tourist numbers continue to grow. Moreover, these investments inthemselves increase overall visits to Ghana and spread benefits as tourists travel to wildlife attractions. Opportunities include (a) adding value to the overall tourism package, as the aerial walkway at Kakumhas done for the coastal tourism route, and (b) attracting visitors and associated economic activity to otherwise little-visited areas, such as Mole National Park (NP) or Shai Hills Resource Reserve(Johnson 1999). - 26 - 10. Forestry employs about 120,000 people in the timber industry and public institutions. The principal trade union in the sector, the Timber and Wood Workers Union (TWU), has around 23,000 members and is the fifth-largest trade union inGhana, representing9 percent of unionized labor (Assens and Jenson2003). 11. In the informal sector, however, tens of thousands of people and many rural households depend on forest resources for their livelihoods, whether it i s timber from off-reserve areas, huntingo f bushmeat, illegal chainsaw operations, fuelwood collection, or the gathering and commercialization of diverse nontimber forest products (NTFPs), includingmedicinal plants, bamboos and rattans. Around 11 million o f Ghana's population live in forest areas; about two thirds of livelihoods are supported by forest activities (Birikorang and Rhein2005). Estimates suggestthat: Small-scale carpenters number approximately 41,000, in addition to around 25 medium- to large-scalefurniture andjoinery companies (Coleman, 2004 inNketiah et al. 2004) Illegal use of chainsaws to convert lumber into timber, largely for the domestic market, provides income for about 50,000 and generates around 12 billion cedis (about US$ 1.3 million) in income (Agyeman et al., 2003). Most chainsaw operators are gang workers, employed by small- and medium-sized businesses; anecdotal reports from the field suggest that only around one third of chainsaw operators are local individuals Although data on the number o f people engaged in bushmeat hunting are scanty, surveys in 1998 suggestedaround 5,000 to 6,000 engagedinregular huntingaround each of the Ankasa and Bia Protected Areas; average incomes from hunting were about US$l,OOO per year (Holbech 1998). Earlier estimates (Hofmann et al. 1999) indicate hunterpopulations o f 4.4 hunters per lanz in hunting areas in Ashanti. On the crude assumption that only half of Ghana might support hunting on that level, hunting for sale and consumption of bushmeat might provide significant contributions to the livelihoods o fperhapshalfa million people. 12. Appropriate wildlife management policies can, however, ensure both conservation and managed exploitation inthe off-reserve areas. Insouthwest Ghana, Cowlishaw et al. (2006) found that, in areas where forests were already degraded, sustainable levels of harvest were possible from fast- reproducingbushmeat species. B. Contributionto Government Revenues 13. Trade level fees (export levies and national reconstruction levy) accounted for more than 50 percent of total charges, representing an important source of revenue for the FC and the MoFEP. The National Reconstruction Levy was abolished in January because of its adverse impact on the profitability of the timber industry.12With the amendment of the Timber Rights Management Act (Act 617) in2003, new fees were introducedsuch as the Timber RightsFee (TRF). l2The Government of Ghana is inthe process o f gradually reducing the reconstruction levy in 2005 and 2006 and plans to eliminate it entirely in2007 (see GoG-National Budget Statement 2005~). - 27 - Figure3-1: Taxes and Charges Facedby the Timber Industryin 2003 2003, Export l e y 2003, Corporate (FOB), 19% taxes, 20% 2003, Stum fees (FOB), , National Reconstruction Ley, 35% m Corporatetaxes National Reconstruction L e y o Stumpage fees (FOB) Export l e y (FOB) Source: Birikorang and Rhein ((2005) 14. Despite a variety of taxes and charges, successive studies have shown that the government does not capture highlevels of timber values. Average stumpage values of Ghanaian timber have been variously estimated at between US$87 and US$l08 per meter (Grut et al. 1991; Richards 1995, and Awudi 1999). By comparison with mill gate prices and prices bid for timber inauctions, Birikorang and Rhein (2005) concluded that the residual forest rent not collected by government was US$lO to $45 million per year. This lost revenue arises from policies that allow inefficient mills to operate, or for the efficient operators to retainthe residualrent as "super profits." 15. In2004, the main chargesto the industry(aroundUS$22 million) accounted for 4.5 percent of the industry's turnover of US$500 million. Only 26 percent o f the total charges were related to timber harvestinghhroughput, while about 54 percent of the total charges were related to trade. Thus, forest revenues are mostly generated through taxes on the value added to forest resources by processing, not throughthe value (e.g., the economic rent) of the resourcesthemselves (Birikorang and Rhein2005). 16. Revenues captured by GoG from wildlife are almost insignificant. Revenues in 2004 amounted to US$155,039, half of this arising from park entry fees (World Bank 2006a), while sale o f game and bushmeat trading licenses comprised US$5,873. District Assemblies also issue "chop bar" licenses. C. EnvironmentalChallenges 17. The nature of environmental degradation in the forest and wildlife sectors is well documentedinthe ESW(World Bank 2006a). Deforestationis estimated at around 65,000 hdyear, and results in an annual cost o f degradation of about 3.5 percent of Ghana's GDP, together with habitat loss and speciesextirpation. Degradationof the forest resource i s taking place: 0 Off-reserve, where loss has arisen from the combined expansion of farming (especially cocoa) and demand for timber from the timber industryfollowing the ERPperiod. 0 On-reserve, where degradation has also accelerated dramatically in the last decade from overlogging, encroachment, illegal logging, and bushfires that the FC has been unable to prevent (see Figure 3- for two of the most stark examples from BrongAhafo Region). - 28 - Figure 3-2: Degradation of Pamu Berekum and Tain I1Forest Reserves PamuBerekumForestReserve 1990 2000 e Reservedin 1932ForestArea in 1932: = 189km' e ForestArea in 1990= 91 km2(98 km' lost in58 years) Forestarea in2000 = 1km2 (90 km2lost in 10years) TainI1ForestReserve 1990 2000 I I e Reservedin 1934ForestArea in 1934: = 509 km2 e ForestArea in 1990=451 lan' (58 km2lost in56 years) 0 Forestarea in2000 = 108 km2(343 km2lost in 10years) Source: Forestry Commission 18. The most recent inventory analysis of the natural forest found alarming results.Usingdata from permanent sample plots across 46 forest reserves and comparisons with inventories in the 1950s, 1974, and 1990, Wong (2003) found that the forest was degrading with a negative basal area of - 0.13mz/ha/year; damage from logging was greater than new growth. The report concluded that whatever the policy goals: Sustainable yield and hence the AAC are therefore going to be small thesefacts need to be ... assimilated at a policy level by both the Forestry Commission and the timber industryifthe continuedpressurefor timber is not to completely liquidate the resource (p 3.) 19. Accompanyingthe loss of forest habitat, wildlife resources are also under severethreat from opportunistic and sometimes excessive levels o f hunting, illegal huntinginprotected areas, unsustainable collection, mining (see Box 3-2), and habitat conversion. There exists clear evidence that the population - 29 - o f many species habitually hunted for their meat has declined over the years. A number of threatened or endangered species are at risk from illegal hunting (particularly in protected areas). Consequently, a significant threat of species destruction i s present (and in one case, extinction); moreover, wildlife resources are not contributing sufficiently to economic development. Box 3-2: MininginForest Reserves Significant debate has occurred on the issue o f mining within forest reserves. Mining in forest reserves contravenes various national policies and the principles underlining the initial establishment o f forest reserves in Ghana as protection reserves: Section 4.4 Subsection (b) of the National Land Policy 1999 states "All lands declared as forest reserves, strict nature reserves, national parks, wildlife sanctuaries and similar land categories constitute Ghana's permanent forest and wildlife estates, and are "fully protected" for ecosystem maintenance, biodiversity conservation and sustainable timber production." Subsection 4.5 (a) o f the policy further states that "To ensure the conservation o f environmental quality, no land with a primary forest cover will be cleared for the purpose o f establishing a forest or tree crop plantation or mining activity. The 1994 Forest and Wildlife Policy states as its primaryaim the "conservation and sustainable development o f the nation's forest and wildlife resources for the maintenance o f environmental quality and perpetual flow o f optimum benefits to all segments o f society." There remains, however, significant concern that new mining will be allowed within forest reserves. In 1996, a ban was placed on mining in forest reserves. This was lifted in September 1997 because o f the amounts invested by firms up to that point; 27 mining companies were subsequently granted rights to continue operations within forest reserves. 20. Theprincipal environmentalpolicy challengesfall intofive broad categories Finding new ways to halt, and reverse, thepace of deforestation, which is currently around 65,000 ha per year, and which hasleft only 16(6 percent) o fthe 266 designated forest reserves inahealthy state (see Figure3-4). Dealing with theparadigm shiftfrom abundance to scarcity of timber. As the off-reserve forests have been converted to agriculture, established assumptions regarding the level o f timber millingthat can be maintained, as well as approaches to the management of off-reserve timber, bushmeat, and other NTFPs needrevision. Coping with continued chronic underinvestment in dry landforestry and agro-$orestry, aresult o f the policy bias on high forest zone timber (Select Committee on Lands and Forestry 2004). Wildfires in periods of prolonged dry years--from the early 1980sto 1994-contributed significantly to the loss o f forest areas inthe transitionzone. Ensuring the efective management and protection of the remaining permanent estate of forest reserves and wildlife reserves. With the loss of the off-reserve buffer,those reserves and PASare now more vulnerable to legal and illegal encroachment. Investmentincapacity buildingo f the FC and WD and increased usage o f SDI and GIS to monitor changes in forest reserve boundaries could be key actions to ensure efficient protection. Moving to an African model of wildlife management that incorporates both the nonutilitarian and utilitarian values of wildlife and more accurately reflects the social, cultural, and economic values of modern Ghana. A more community-based wildlife management approach i s recommended. - 3 0 - Figure3-3: Map of Ghana ShowingConditionof ForestReserves = 1(Excellent) 4 (Mostly Degraded] I Savanna 2 (Good) 5 (Very Poor) -3 (Slightly Degraded) -6 (No Sig. Forest] Source: Hall & Swaine (1981). Principal Policy Issues A. Rationale for Government Intervention 21. The principalrationale for government intervention remainsthe needto deal with market failure, i.e., the market may not always allocate scarce resources efficiently in a way that achieves the - 31 - highest total social welfare. This rationale i s consistent with the aim o f the Government Forest and Wildlife Policy, namely: "Conservation and sustainable development of the nation's forest and wildlife resources for maintenance of environmental quality and perpetual flow of optimum benefits to all sements ofsocietv"[our emphasis](GoG 1994, p. 8). 22. Unfortunately, the policy makers and regulators in the ministry and the Forestry Commission have been unable to either address the market failure mandate or realize this espoused policy. Inpractice, policy decisions have been driven by concerns for narrow segments o f society (timber supply for loggers and millers, formalized workers) at the expense o f sustainable development and the environment. 23. For most of the last century, the role of government in the forest sector has been interventionist and centralized. The early justifications in the 1920s and 1930s for the transfer o f land management from traditional authorities and chiefs to the newly formed Forestry Department rested on concerns about loss o f valuable resources, but were linked to arguments for environmental and watershed protection. Inthe war years, however, the colonial authorities were able to cite military prerogatives for accelerated timber production. More recently, the policy instruments o f the 1983-88 ERP were similarly interventionist and driven by the need for urgent structural reform. Successive forestry officials over the course o f 70 years have opposed decentralization and-in particular-proposals to cede authority over forest resources, especially timber (de Grassi 2003). Little attention was paid to the role forests played in livelihoods or diversified farming systems. 24. Early wildlife policies were based upon similar approaches. For the most part, these approaches failed to recognize the social, cultural, and utilitarian values that Ghanaian societies placed upon the resources. Policy was therefore developed around "protecting" wildlife from rural people (see Adams and McShane, 1996). Post independence, the appropriation o f wildlife resources by the state was carried over, further usurping existing common property regimes. The legal framework for PASwas developed in the 1960s "at a time when consideration o f the sustainable use o f wildlife outside o f protected areas was unheardo f inAfrica" (Murphree 2005). 25. In any case, the assumption underlyingthese policy approaches-namely, the ability of the state to control the behavior of either market participants or rural populations-no longer holds. There i s limited evidence that the centralized agencies are now able to control access to, and exploitation of, forest and wildlife resources. Illegal logging, chainsaw logging, and bushmeat hunting are largely uncontrolled. The state, by assuming authority for these resources without the capacity to exercise its responsibilities, has created at best an open access system. B. Forest andWildlife Policies 26. Government forest policies began to evolve during the colonial administration of the late 1880s as concerns arose over degradation of natural resources. Most o f Ghana's forest reserves were established through negotiation with chiefs and traditional authorities in the 1930s. Reservation was enabled either through the 1927 Forest Ordinance or the Native Authorities Ordinance (which enabled authorities to constitute forest reserves under their bylaws). The rationale for reservation was one o f protection, and hinged on the authorities' role in the protection o f watersheds and from drying winds. As Smith (1999) notes o f the Ghana forest reserves: As a system of protective forest reserves carefully arranged around rivers and headwaters, along scarps and across the drying savanna winds, it ispossibly unique (p. 10) 27. The first formal forest policy was prepared in 1948, and provided for conservation and protection of the forest reserve estate, but foresaw that the off-reserve areas would ultimately be liquidated The 1994Forest and Wildlife Policy is the current policy document, and aims at conservation and sustainable development o f the nation's forest and wildlife resources for maintenance o f - 32 - environmental quality and perpetual flow of optimum benefits to all segments o f society. In 2001 a separate policy on CREMAs was issued, and in 2001 a Forestry Commission Service Charter was published, setting out public service performance standards that the FC's customers and clients could expect. 28. The 1994 policy was well formulated and remainsbroadly relevant today. It recognizes the needto balance forest and wildlife resourcesbetween users, and to maintain a renewable and lasting flow of benefits. The current operational objectives of the MLFMreflect similar areas of policy concern, and were outlined recently (Fobih 2005) as: (a) securing the resource; (b) restoring the resource; (c) generating optimum revenue from the resource; and (d) ensuringequitable sharing of forest benefits. 29. Plantation developmentis a high priority, but GoG policy over the last 20 years has beenin some disarray. In the mid-l990s, considerable effort was invested in developing proposals for the privatization o f the state's plantation assets. The reasoning was to help enable the proposed Forest Service (which later became the new Forestry Commission) to focus on its regulatory, community forestry and protection functions. These efforts foundered because o f concerns over valuations, and a reluctance to cede authority to the private sector. Subsequently, the Forest Plantation Development Fund Act was established to support the much-needed investments inplanted forests. 30. Currently three separate schemes are inoperation, namely: 0 The Forestry Commission's modiJed taungya system, which i s being implemented by the PlantationDepartment o f the FSD. 0 A program financed by the Forest Plantation Development Fund. Act 583 o f 2000 as amended by the Forest Plantation Development Fund (Amendment), Act 623, 2002 states (section 4[1]) that sources for the fundmust be derived from "(a)the proceeds of the timber export levy imposed under the Trees and Timber Decree 1974 (NRCD 273) as amended by the Trees and Timber (Amendment) Act, 1994 (Act 493); (b) grants and loans for encouraging investment inplantation forestry; (c) grants provided by international environmental and other institutions to support forest plantation development projects for social and environmental benefits; (d) moneys to support forest plantation development provided by Parliament from the Consolidated Fund and from any other source approved by the Minister of Finance." 0 The Ministry of Lands and Forestry (MLF) HIPC scheme, which initiated a forest plantation development program in2003, funded from the HIPC savings. - 33 - Box 3-3: Securing the Resource The MLFMhas inplace, or has proposed, a range o f measures to secure the resource (Fobih 2005). These fall into four broad categories: Initiating fiscal measures, market mechanisms, and tax incentives, including: -- measuresto assist inrationalization o f the timber industry competitive bidding inorder to capture the economic value o f the resource Strengthening o f control mechanisms andprotection: -- institutionalspecific - introduction o f a log-tracking and wood legality assurance scheme strengthening o f the WD to facilitate effective control o fpoaching inPAS designating areas as biodiversity reserves Encouraging investment innew enterprises: - small-scale alternative livelihood schemes to wean fringe communities off forest reserves, through community investmentfunds and similar support for economic activities (oil palmprocessing, - promotion piggery, soap making, grasscutter rearing, etc.) o f savanna medicinal plants and other potential crops Involvement o f forest fringe communities organized inCREMAs,CBAGs, CFCs, and CORMACs, to act as a "sort o f `social fencing"' to protect the resource. These are a good set o f actions, although the rationalization o f the timber industry is clearly a tough challenge to implement, and additional approaches to community forestry and wildlife management have recently been recognized from success stories inother countries (such as Zimbabwe andNamibia). 31. New approaches will be needed to fill the cash flow gap that occurs in the early years of plantation and reforestation efforts. A number o f opportunities are: (a) the modified taungya system, which provides incentives for farmers through intercropping in the early years o f plantation establishment; (b) securing carbon values, and (c) usingbushmeat resources-key bushmeat species are, under favorable conditions, so prolific that a reasonable retum can be expected from even small areas o f land. 32. For the naturalforests, the steps outlined in securing the resource are key steps for allowing recovery of the forests. Past overlogging means that some forests simply need decades o f "convalescence." C. Revenue Generation from the Resource 33, Since November 2003, the Forestry Commission has introduced market-based concession bidding in both on-reserve and off-reserve areas to increase transparency and revenue collection from Timber Utilization Contracts. The annual timber rights fees (TRFs) are determined through the competitive biddingand aim to capture a larger share o f the forest rent where stumpage fees have failed. 34. Despite a good start and high expectations from competitive bidding, severe revenue shortfalls remain. The FC has to date conducted four competitive biddings for the allocation o f timber rights (area charge with harvesting limit).Despite highexpectations interms o f revenues generation from the logging concessions (potential annual revenues have been estimated at US$14 million), the government failed to collect the outstanding payment (mainly comprising the annual TRFs). The bidding process came to a halt entirely in 2005 when some timber companies began to sue the government regarding the transparency o f the process and the eligibility o f applications. This resulted incancellations to the four planned competitive biddings in 2005 and severe revenue shortfalls for the government in 2005. The most recent auction (April 2006) for competitive bidding has attempted to plug loopholes in procedures for payment, and has recordedtotal bids o fUS$9 million. 35. Tax exemptions and avoidance further erode the government's revenue receipts from forestry. The timber industrybenefits from tax exemptions that are applicable to all other companies in - 34 - the manufacturing industries.These exemptions include: (a) exemptions on import duties, (b) tax rebates for manufacturing companies located in rural areas, and (c) a Tax Free Zone (see Box 3-4 below). The Tax Free Zone was originally created to provide tax incentives for newly established manufacturing industry, exempting it from the payment of corporate taxes. However, over the past years, long- established companies have succeededinenteringthe Tax Free Zone. Estimates suggest a revenue loss of US$4 million (Birikorang and Rhein 2005). Box 3-4: Tax Exemptionsof Benefitto the Industry Export taxes -- While Since 2004, no export duty on lumber, veneer, andplywoodproducts has been ineffect. export duties o f 3 percent o f the price are levied on several wood products, the export o f round and square logs remains completely banned since the nineties. Taxes Manufacturing industry - Tax rebates between 25 and 50 percent are granted to manufacturing industry located outside Accra (regional --- capitals 25 percent, elsewhere inGhana 50 percent). A researchand development expenditure bya manufacturing company is filly deductible. Companies that export nontraditional products (such as wood products) only pay an income tax o f 8 percent. The number o f new industries has increased significantly in the past years, and the free tax zone has created revenuelossesfor the government fromthe local economy. -- Companies Corporate income taxes this year went from 32.5 (2005) to 28 percent. enjoy special rates o f capital allowances. (Therate varies according to the classification o f the asset.) - Losses can be carried forward for the next 5 years o f assessment following the years in which the loss was incurred. Trade taxes - Timber industrybenefits by a zero rate on import duties, which applied to all industrial machinery. (A 5 percent rate i s applied on specific materials for the manufacture.) 36. Tax policies favor the wood-processing industry but discourage the high value-added tertiary processing. Within Ghana's Forestry Development Plan (1996-2020), the government committed to increasing the share o f high value-added products made from lesser-used tree species. However, the current tax policies support wood processing, a second-level lower value-added industry, instead of tertiary processing. This i s done by maintaining (a) a low level o f charges on timber harvesting and throughput (because of the low stumpage fees), and (b) low export taxes on intermediate wood products. Efforts to increase the volume by the tertiary subsector through a backward integration of secondary processing has been hampered in the past, following (a) the high share of export o f commercially valuable species in primary and secondary form; (b) the limited supply that is controlled mainly by operators in the secondary large-scale wood-processing industry (they produce and export more than 80 percent o f processed wood and molding); and (c) high charges at the trade level (tax on FOB priced export product) that discourages the investment in higher value-added tertiary processing (Birikorang and Rhein 2005). 37. Recent tax reform measures. Over the past two years, the government has approved a number o f policy measures that aim to rationalize and consolidate forest industry taxation without further sacrificing national revenue objectives. These include: (a) exports o f all unfinished products (which include veneers, boules, etc.) will be taxed at the full corporate tax rate o f 35 percent, instead o f the non- traditional export rate o f 8 percent (the laker will be applied only for income from export of finished products); (b) abolition o f the National Reconstruction Levy; (c) review o f locational tax exemptions and rebates enjoyed by timber-processing and logging companies located in southern Ghana; henceforthonly companies situated outside the timber-producing zone (Volta, Northern, Upper East, and Upper West - 35 - regions), are to enjoy location incentives; (World Bank 2005) and (d) a review of the Tax Free Zone, initiated in2005, to attain more transparency and reduce the tax evasion. D. Distributional Aspects 38. The distribution of forest revenues is also highly contested. Untilrecently the FC took a first charge on all forest revenues of 60 percent, in order to cover management, operational, and investment costs. In 2002 this was reduced to 40 percent in the case o f off-reserve timber. The remaining 40 or 60 percent after deduction of FC charges i s delivered to the Office o f the Administrator o f Stool Lands (OASL).13Inaccordance with Section 8(1) of the Office o f the Administrator of Stool Lands Act, 1994, the OASL first retains 10percent to cover its administrative costs, and thenallocates remainingrevenues to "stakeholders" according to the following constitutionalformula. 25 percent to the stool "for the maintenance of the stool inkeepingwith its status"; 20 percent to the traditional authority (generally the paramount chief and his council); 0 55 percent to the District Assembly (Constitution 1992Article 267 [6[). 39. The above revenue-sharing formula represents a split o f revenues negotiated between the customary state (stools, paramountcies) and the state government at the time o f the formulation of the 1992 constitution. There are severalpoints of contention, however: 0 The chieftaincy institutions challenge the basis for the first charge taken by the FC for management o f forests. They consider 60 percent and 40 percent to be excessive since the FC has not managed to protect many forest reserves-particularly those in the transition zone--from destruction, and off-reserve areas are not managedbutmerely licensedfor liquidation. 0 The construction of the formula and its constitutional wording conflict with other constitutional provisions that land i s heldintrust by chiefs on behalfo f the people (the implicationthat the stool i s the chief). As a result there are no obligations on stool chiefs or traditional authorities to allocate their share of funds to forest-adjacent communities. Some do, some don't, and essentially any benefits to the chiefs' subjects are at the discretion o f chiefs and traditional authorities. The revenues to the District Assembly are not earmarked for forest communities and so may be spent indistrict centers rather than rural areas. Chiefs can, however, argue that they have no need to disburse portions of their funds to communities, as this i s the purpose of the allocation to DAs. 40. Social Responsibility Agreements (SRA) are one mechanism to direct benefits to communities. The Timber Resource Management Act (Act 547) enabled these agreements, and they have most recently been set at a fixed amount of 5 percent of stumpage values inL.I.1721. Payments are made directly bytimber firms to communities, often inthe form o fpublic services, school buildingsor roads. Legal Framework 41. The legal framework for the forest sector comprises a mix of old and new legislation. Old laws still in force include the 1927 Forest Ordinance, which operates alongside recent primary legislation (Acts) and regulations (Legislative Instruments, L.I.s), as shown in Table 3-2. In 1996, proposals were l3Section 2 (a) and (b) o f the Office o fthe Administrator o f Stool Lands Act provides that the Office o fthe Administrator of Stool Lands i s responsible for "the establishment o f a stool land account for each stool into which shall be paidrents, dues, royalties, revenue or other payments whether inthe nature o f income or capital from the stool lands, (b) the collection o f all such rents, dues, royalties, revenues or other payments whether inthe nature of income or capital and to account for themto the beneficiaries stipulated inthe Act and (c) the disbursement o f revenues inaccordance with the Act." - 36 - submittedto the MinisterMLFbya committee for a consolidated forest act (Committee for the Review of Laws in the Forestry Sector 1996). Draft legislation was prepared that brought together forestry and wildlife and included proposals for the devolution of authority for forest management to local communities through dedicated forests. A consolidated act never emerged from the ministry, however, and the more narrow Timber Resources Management Act became the main new piece o f forest legislation. Table 3-2: PrincipalForest LegislationCurrently in Force 1927 The Forest Ordinance (Cap 157) 1994 Trees and Timber Amendment Act ,Act 493 1997 Timber ResourcesManagement Act- Act 547 1998 L.I.1649-Timber ResourceManagement Regulation 1999 Forestry Commission Act 571 2000 Forest PlantationDevelopmentFund, Act 583 2002 Forest PlantationDevelopmentFund(Amendment),Act 623 2002 Forest ProtectionAmendment Act, Act 624 2002 Timber ResourcesManagement Act 617 (Amendment) Act [AmendsAct 547 of 19971 2003 L.I.1721-Timber ResourcesManagement Regulations [Amends L.I. 1649 o f 19981 Table 3-3: PrincipalWildlifeLegislationCurrently inForce[PLEASEPROV. SOURCE] Year Name of law Amendments(mainly gazettingPASandRRs) 1961 Wild Animals PreservationAct 1971 Wildlife Reserves Regulations: 1974, L.I.881; 1975, L.I.1022; 1976, L.I.1085; L.I.710 1977, L.I.1105; 1983 L.I.1283, 1991, L.I. 1525 1971 Wildlife Conservation 1983, L.I.1284; 1988, L.I. 1357; 1989, L.I.1452. Regulations: L.I.685 42. The legalframework for wildlife governanceis also dated, reflectsthe legacy of the colonial administration,and does not fully support current policy.The Wild Animals Preservation Act of 1961 regulates the use and exploitation of wildlife inGhana and establishesthe Government's right to establish protected areas. Detailed management organization i s provided for in both the Wildlife Reserves Regulations: 1971, L.I.710, and the Wildlife Conservation Regulations: 1971, L.I.685. Some o f the laws are perceived as beingfundamentally unfair, at odds with local values, or impossible to implement. New legislation i s currently being drafted with technical assistance from IUCN, which will enable (a) recognition of the common property issues associated with managing the off-reserve wildlife estate, and (b)devolutionofauthorityto an appropriate level for management. 43. Other gaps in the legal framework must be filled in the short term, for example: (1) improving the Forest Plantation Development Fund Act, which i s designed to enable financial assistance for the development o f forest plantations, yet does not specifjr important issues such as the restrictions and obligations of grantees o f the fund; (ii) enabling legislation to provide for voluntary establishment o f dedicated forests off-reserve; (iii) dealing with timber rights fees when TUCs are not allocated through mechanisms such as conversion; (iv) treating unsolicited bids (e.g., for wild life lodges or facilities); (v) creating a better definition and better processes for implementation of social responsibility agreements (SRAs); and (vi) harmonizing the fiscal incentives and mechanisms for private-sector plantation investments, including treatment of carbon values and other environmental services. - 37 - 44. Although the efforts to produce a consolidated law in the 1990s foundered, in the medium term, a comprehensiverevisionof the law will be needed.This is unlikely to be an easyjob, as it will open up challenges to benefit sharing and other arrangements, and will require a well-managed, consultative process. However, a new law can itself be a signal of the shifts inthinkingthat are needed, giventhe limitedamount ofcommercial timber left offreserve. 45. As with many country's forest laws, the major problem remains capacity to implement. Solutions to this problem lie inthree areas: (i)"Capacity buildingand institutional strengthening." Inparticular, the staff of the FC and WD would benefit from enhanced capacity building. This i s the usual response, however, but the lesson from the past i s that this will only work well in conjunction with measures that tackle the loss of institutional revenue from rent-seeking behavior. Insome activities, such as log tracking, more investment i s definitelyneeded. (ii)Withdrawal ofthe statefrom areaswherethe privatesector is better placed. Plantations remainthe obvious opportunity here. (iii)Further strategic review of the costs of forest regulation. For example, if off-reserve managementi s transferred to local communities, thenthe costs o f licensingcan be cut back. Institutions 46. The Ministrv of Lands, Forests and Mines MLFM) has overall sector responsibility, and lead responsibility on policy. Over the last decade, however, the ministry has exhibited a lack of capacity for evidence-basedpolicy. A range of options have been tried, including: (i) drawing on external projects (such as the DFID-fundedFIMP project based in the former FD Planning Branch in Kumasi, 1993-1996); (ii) posting expatriate forest policy advisers within the Ministry; (iii) commissioning policy reports (e.g., the Wood Industry and Log Study); (iv) forming special policy committees (such as that convened by Minister Kasanga); (v) creating policy-funding facilities (e.g., the DFID-funded pilot GLFPSF); (vi)obtaining policy inputsfrom the Forestry Commission. 47. None of these has provento be an enduring success, and today's ministryremains relatively weak in both policy analysis and policy-monitoring capacity; moreover, it is overreliant on a few key individuals. Like most ministries, the PPMED function i s also not very effective. At times the Ministry's intervention in operational areas (e.g., the HIPC plantations program) threatens to distract its attention from core policy functions. 48. The Forestrv Commission is the principal regulator and implementation agency in the forest andwildlifesectors. Today's commission was formedbyAct 571 of 1999 from the merger of five organizations-the Forestry Department o f the Ministry of Lands and Forestry, the Timber Export Development Board, the Forest Products InspectionBureau and the Department o f Game and Wildlife of the Ministryof Lands and Forestry, and the former Forestry Commission. Total staffing in today's FC i s 3,733 (as of January 2006) compared to 88 in corporate HQ,and the remainder i s split between the three divisions of the FC as follows: the Forest Services Division (FSD), which includes the Resource Management Center at Kumasi, and the Plantation Deparhnent, has 2,509 staff in total, the Wildlife Division has a staff of 963 (although a significant "right sizing" exercise is foreseen to rebalance staff numbers from the lowest to professional levels), and the Timber Industry Development Division has a staff of 173 staff. 49. Cultural differences remain between the divisions, in particular between the Wildlife Division (WD) and the FSD. WD staff have been suspicious that closer integration will lead to timber - 38 - interests being exerted on the commission, leadingto commercial exploitation of the ProtectedAreas (this indeed happened in Bia PA). It has been recommended that the WD undergo restructuring and further human resource development inorder to be able to operate more efficiently. 50. The FC has not decentralizedits operations,as was once envisagedinthe localgovernment act. Forest "districts" are not the same as administrative districts, and the FC maintains control over the assets and staff in the district offices. However, some innovations have occurred, including the establishment o f Community Forestry Committees (CFCs) and the introduction o f Customer Service Officers. Community Forest Committees were establishedbythe Forestry Commission as a mechanism to engage forest fringe communities in local forest management planning, although authority for the forest remains with the FC. While sometimes seen as an appendage o f the FC, some CFCs are now becoming local advocatesintheir ownright and are holdingthe FC more accountable. 51. Since 2005, the FC's operationalfunding in district has been severely constrainedby a mix of legal challenges, policy decisions, and campaigns of nonpayment of royalties. Table 3-4 below shows the agency's struggle to operate with inadequate funding. Over the years 2003 and 2004, the execution rate of the FC budget came on average to 67 percent. This rate i s mainly related to (a) a low collection o f IGFs, and (b) limited disbursements of donor aid.14 It i s also noteworthy that the MoFEP retained a share o f the revenues accruing from IGFs until 2005, thus further limitingthe funding base of the FC. The overall underfunding of the agency has weakened the commission in several key areas: although salarieshave beenpaid, operational funds for districts were almost nonexistent in2006. This has created a vicious circle, crippling the FC's ability to regulate logging operations and enforce collection of forestry fees and royalties. Table3-4: ForestryCommission-Budgetary AllocationsandActualSpending 2002-2005 (in millionsof US%) 2002 2003 2004 2005 DepUAgencies Budget Release' Budget Release Execut. Budget Release Execut. Budget rate rate (in (in percent) percent) TOTAL 17.32 0.0 23.4 15.6 66.5 30.5 19.2 63.0 30.63 CF 1.775 0.0 5.26 3.65 69.3 2.66 2.64 99.2 6.92 IGF 13.37 0.0 10.6 6.97 65.6 22.2 12.77 57.4 15.74 Donor 2.185 0.0 7.54 4.97 65.9 5.60 3.80 67.9 7.97 assistance a. Budgetdata on the implementationofthe FC budget couldnotbeprovidedbythe FC. Source: FC data. 52. Budget allocations and releases to the FC are subject to high fluctuations of budgetary allocationsprovided by the CF budget and the IGF. Allocations have increased by an annual average of 33 percent over the period 2002-2004. The CF and IGFs finance mainly the commission salaries and nonsalary recurrent expenditures (see statistical appendix); the oscillations hamper the commission's ability to plan and finance its operating expenditures. Stagnation inbudgetary allocations between 2004 and 2005 primarily reflects the commission's difficulty in implementing the timber auction; as a result, the 2005 allocations include arevised, morerealistic revenue forecasting. l4 also See Forestry Commission (2004) Annual Report. - 39 - 53. The Ministrv of Environment and Science was abolished in April 2006, and the environment portfolio now rests with the Ministry o f Local Government, Rural Development and Environment. The former M E S was seen as a relatively weak ministry,and lacked cabinet status. 54. The Environmental Protection Agencv has relatively little engagement on forest, wildlife, or biodiversity issues. The main points o f interactionrelate to EIAs within forest reserves, and, previously, the intersectoral cooperation groups. Despite the relative importance o f the sector, there i s little engagement by either the Ministryo f Trade or the newer Ministry o f Private Sector Development. 55. The 1992 Constitution placed a specific role for Parliament in regard to the regulation of natural resources, by providing for parliamentary ratification o f contracts relating to the exploitation o f natural resources. Most recently, this authority has been used to ratify Timber Utilization Contracts, which had been subject to replacement. (Objections to these contracts had arisen from civil society, both before and after their ratification.) The Parliamentary Select Committee on Lands and Forestry i s relatively well informed on policy matters within government, having received DFID-funded project support. Table 3-5: Sector Institutions:IndicativeImpactsof PolicyExecution Impact on policy outcomes Agency Notes 1.Central Government MDAs(Ministries, Departments, & Agencies) Parliament 0.. Select Committee is well-informed, ratifies TUCs. MoFEP 0.. .... Involved, because o f concerns about revenue losses. RevenueBoard 0 ..... May be agent for stemming revenue losses. CEPS (Customs) 0. Collects export taxes from timber. MEST 0 Little involvement inthe sector. EPA 0 Almost invisible inthe sector. OASL 0. Allocates stool revenues from forests. MLFM Leadministry for forest policy; HIPC plantations. Forestry Commission Regulatory agency for GoG forest & wildlife policy Police 0. Enforcement / Illegal logging task force. N A D M O 0 Reforestationand HIPC plantations. Fire Service 0 Bushfre control innorthernregions b Y 0 Involvedinillegal loggingtask forces. 2. Local and Customary Government National House o f Chiefs Strong critic o f management fees retained by the Forestry Commission. Stools and Skins 0.. Hold forest land in custody for people; recipients o f .... forest revenues from OASL. Municipalities 0 Virtually no involvement. District Assemblies/ 0 Recipients o f forest revenues from OASL but otherwise generally passive; District Environmental ..... Management Committees could be strengthened. .... .... MLGRD 3. Private Sector Trade Associations Represent factions of the industry. (GTMO, GTA, GhaTEX) Large integrated Harvest, process, and export timber; might be the processors future o f a sustainable industry. Large millers Limited processing-the "old" industry relying on an unsustainable consumption of timber. Local millers Mainly for domestic use. Local chainsaw loggers 0 Profoundimpact. Commercial farmers 0 Locally important if plantations (oil palm) & large - 40 - .... 0 .... farms. Small farmers .... Conversion o f forest to agriculture. Tourisminvestors Little impact so far. Nomadic herdsmen 0 Followers o f landuse shift- forest to grassland. Canoe fishermen 0 Users o f logs for keels o f ocean canoes. Hunters Mainly commercial. Chop bar owners Enduserso fbushmeat. Bushmeat traders Supply users. NTFP users Wide range. 4. Civil Society-Policy ThinkTanks & Academic Institutions University of Legon 0 Few individuals with strong interest inforestry KNUST / CRNR 0 Limitedinterest andcapacity Univ CapeCoast 0 Limited interest and capacity ISSER 0 Broader interest inlandrights UDS (Tamale) 0 Limited interest and capacity CSIR / FORIG 0 Limitedcapacity 5. Civil Society-NGOs, CSOs, CBOs Forest Watch 0. Main coalition on forest advocacy and community rights Internationally-affiliated 00 Active in local services, channeling advocacy work NGOs (FOE,CARE, CI) through Forest Watch; some strong differences o f approach Internationally-affiliated 0. Work with GoG and industry to encourage a legal, NGOs (WWF, GW) sustainable industry National NGOs 0 Diverse, and varied interest in forest issues. Some strongly influencedby internationally affiliatedNGOs Community Forest CBOs 0 Locally important, but still too few, too weak. CFCs and CREMAs have significant potential however to increase accountability pressure on Government Trade Unions 0 Concerned over job losses intimber industry Impacton realizedpolicy outcomes: 0000 =veryhigh 000 =high 00 =medium 0 =low 0=none 56. Public finance management and revenue agencies have been closely involved with the forest sector: 0 MoFEPhas a particular interest innontax revenues collectedby the FC. 0 The IRS i s responsible for the assessment, collection, and recovery of corporate taxes and PAYE. 0 Customs Excises and Preventive Services (CEPS) i s incharge o f collecting import duties. 0 The FC is responsible for collecting stumpage fees, TWs, SRAs fees, and export levies. The stumpage fees are shared with other stakeholders. The species-specific air-dried lumber export levies are paid into the FC plantation development find, and the across-the-board 3 percent ad valorem export levy i s paidto the Forestry Commission. - 41 - Impediments and Incentives for Change A. TranslatingPolicy into Practice 57. The 1994 policy is Ghana's espoused policy, The NRMP programwas designed to assist the government to deliver on those policy goals. Translating the policy into practice has been very different. The main areas o f difficulty outlined inthis section include: 0 Underestimationo f the power o fpatronage-based and vested interests. 0 The scale o freforms. 0 The fact that centralized control systems over localized resources haven't worked. 0 Lack o f knowledge and transparency over the state o fthe forests. 0 Institutionalrole confusion. B. Governance Issues 58. Designers of forest sector reforms over the last two decades-both from within government and within DPs-have consistently underestimated the degree of governance problems in the sector. This underpins all other areas o f difficulty. 59. It is important to recognize the special governance challenges that resource sectors pose, because of the value of the resource itself. If appreciation o f the political economy o f reform is needed anywhere, it is in the natural resource sectors. The phenomena o f the "resource curse" and the "rentier state" are widely recognized at a macroeconomic level, but these play out in the day-to-day institutional economics o f ENRM sectors. As long as the timber industry i s able to avoid or delay payments o f forest royalties and taxes, it has large incentives to: (i)maximize short-term returns and capture available timber rents, (ii)avoid taxes, (iii) regulatory capture o f the principal regulator, the Forestry Commission, attempt both at the center (the F C Board, senior officers in corporate headquarters and FSD) and in the districts (district and regional managers, field staff), as well as other influencers, and (iv) influence legislators and policy makers at all levels. 60. Although the ERP enabled economic recovery, it contained the seeds of a major governance challenge, unrecognized at the time. The soft loans available for the industry introduced graft and corruption on a new level, which was widely reported at the time. Expansion o f processing capacity was encouraged, but without any thought as to exit mechanisms. Since then the industryhas lobbied hard and consistently to keep the input (log) prices low, so as to continue to operate mills. Purchase o f illegal timber (including timber taken from timber use permits [TUPS])i s one mechanism to avoid forest taxes. Other industry-ledcampaigns to avoid timber charges include: 0 Delayed or nonindexed stumpage rates. During years o f high inflation, this delivered high windfall gains to the industry.At their lowest, stumpage rates fell to US$3 in 2002-less than 3 percent o f average export values. 0 Nonpayment o f interest on arrears o f stumpage, and outstanding debts. 0 Challenges to the legality o f export levies and, most recently, TRF. 61. Industryactors have also used court-based injunctions to prevent or delaypayment, andregistered new companies when existing firms became blacklisted for debts. Another sign o f avoidance i s the registrationo f new property marks at the same time as the timber resource is dwindling. - 42 - 62. The neopatrimonial nature of public sector and public-private relationshipsis recognized, well known, and well-documented (see, e.g., Levy 2004). In Ghana, Booth et al. (2005) describe "an enduring neopatrimonialism of a peculiar Ghanaian sort in which `horizontal' interest groups are subordinated to `vertical' patronage relationships. This weakens issue-basedpressures and the demand for improved performance." C. The Scale of Reforms 63. Administrators of the 1994 governmentwere engaged simultaneouslyon policy reform,new legislation, design of new processes, major institutional reform (the creation of the new Forestry Commission), and tackling issues such as mining in forest areas. Although the government was then able to identify the best areas and packages o f TUCs, reform overload ledto (i) the inability, inthe face of concerted industry opposition, to introduce subsidiary legislative instruments for enabling competitive bidding, (ii) to convert concessions and leasesinto the new TUCs within the six months specified failure inthenewlaws, leadingto a situationwhere all loggingwas illegal, (iii) little attentionto dealingwith too the overcapacity of the industry, whether encouraging adjustment (decommissioning of inefficient mills) or investment (e.g., intertiary processing, and improved millingefficiency), and (iv) insufficient capacity to address other key aspectsofpolicy and legislative consolidation. 64. The NRMP Implementation Completion Reportnoted: Project designfailed to identi3 as a risk, that it would be very dfjcult to complete the myriad of policy reforms in a complex sector such as Forestry in 2years. Thus, theproject was overly ambitious given the number of activities in each sub-component, the number of co-jnanciers and the weak human capacity at the MLF (World Bank 2003). 65. The partial completion of reforms had unintended consequences. It encouraged individual operators to accelerate the harvesting of assets (through TUPS)and compete with other timber operators ina "race to exploit" remainingforest reserves before competitive biddingwas introduced. This resulted ina further increaseinthe millingcapacity after 1994, as well as collusionbetween operators and those who could grant access to timber. Administrative allocation of resources persisted after the introduction o f the Timber Resources Management Act of 1997. Ineffective regulation of off-reserve timber exploitation was facilitated by several factors. One was the lack o f community benefit from legitimate timber logging. Another factor was the temporary policy o f chainsaw permits being regulated by cash- strapped District Assemblies. Still another was industrynoncompliance with directives that 20 percent o f timber milled should be available on local markets. Inaddition were the complaints by farmers o f lack o f compensation from crop damage arising from loggers entering their farmland to fell and haul logs. Farmers came to view trees on their farms as a nuisance rather than a usefulpart o f a diversified farming system, andpreferredto see trees felled illegally butwithat least some compensation to themselves. D. Overcentralization ofManagementFunctions 66. N o consistent attempt has been made to devolve and decentralize responsibility for timber harvestingto locallevels.Ifthere hadbeen, some of the costs ofregulation o fthe off-reserve areas might have been handled, as might the social problems o f chainsaw logging. The center ties, but fails, to implement control. Examples follow: 0 The Forest Sector Division attempts to control small-scale logging for use by communities by introducing small-scale permits -TUPs -for timber destined for community use. Yet in2006, large logging companies were publicly admitting that up to 25 percent of their logs came from TUPs. The fact that licenses are given to small loggers, not communities, helped create the chainsaw "menace" that the neither the FC nor local communities seem able to control. - 43 - 0 The Wildlife Division attempts to manage a US$200 million trade in bushmeat by issuing licenses. Inpractice, licensing i s sporadic: for example, inthe first six months o f 1999, only 110 huntinglicenseswere issued(Symons 2000). 67. The Ghana system for involving communities in wildlife management (the Community Resource Management Area, CREMA) goes further than any other system in Africa in devolving both the authority and responsibility for wildlife to the level of the individual farmer. The importance o f this approach has gone largely unnoticed despite its implications for off-reserve wildlife management as an extra-farm resource in high forest, transition, and savanna areas. The WD's CRMU, which has been instrumental in driving this reform, remains underresourced, however, perhaps a reflection of the difficulties involved infundingprocessesand programs rather than projects. 68. The CREMA approach recognizes that the failure of modern government systems to incorporatecommonproperty regimes has often resultedinthe institutionalappropriation of forest resource values. Therefore, forest-dependent communities are not poor becausethey dependon the forest resources; neither do they depend on forest resources because they are poor. They are poor because successivepolicies have deniedthem the option of usingthese resources for their livelihood. The situation then becomes one where high-value forest resources (timber, bushmeat, live animal sales, NTFPs, intellectual property, and possible future use values) are replaced by low-value conventional agricultural crops over which they have legal ownership. Box 3-5: Does CommunityManagement Work inGhana? Evidence from other countries shows that community management o f forests and wildlife can work. In Namibia, wildlife numbers in community-managed reserves increased 30 fold (Williamson 2003); in Zimbabwe, the CAMPFIRE program o fdevolution o f wildlife management to the district i s now generally adjudged to be a success. Genuine CBNRh4 has hardly beentried inGhana. However, the evidence is that-given the chance-CBNRh4 can work inGhana too: the health o f sacred groves throughout the country amply demonstrates that communities can exercise control over access to the forest and also support conservation efforts (Campbell 2005). The AssinFosuDF established inthe mid-1990s remains inmuchbetter healththan nearby reserves managedby the FC. Forest quality has improved, there is regular boundary maintenance, and illegal farming within the DF has stopped. The Amokwaw CREMA-although only established in 2003-shows that the expected behavior change i s emerging: clearing o f lands within the CREMA for agriculture has decreased; poaching within the CREMA and the adjacent area o fAnkasa PA has decreased; and less conflict exists between the WD managers o f the P A and the community (Murphree 2005). However, chiefs and NGOs have said that the more appropriate question is, "Does State Management Work?" The extensive degradation o f forest reserves, and the increasing pace o f degradation inthe last decade, both challenge the assumtionthat central control can continue to work. E. Knowledge andTransparency 69. Although the problems are well-known to "insiders" within the sector, there is little public debateon the state of the forest sector: 0 The supply of information i s poor, and asymmetric. The FC produces no annual reports monitoring the state o f forests, or the loss of biodiversity. The FC website i s bereft of information on the state of the resource, and publications andreports from the RMSC are difficult to come by. GIS and satellite imaging tools are not used to their full potential, when they could be used to survey and monitor forest reserve boundaries, for instance. The most plentiful and widely publisheddata available arethose ontimber trade statistics, itselfareflectionofpriorities. - 44 - 0 However, the demand for better information-and performance-is also poor. Until recently, Parliament has not demanded that the MLFM comply with its legal obligations to table annual reports and accounts of the FC before Parliament. MoFEP has been reluctant to include tough triggers on forest revenue collection within its MDBS negotiations. For its part, civil society has been relatively weak; only in the last three years have coalitions o f NGOs come together to demand better performance from the FC. 70. The Ministry and the Forestry Commission could still become more transparent. For instance, there i s too little monitoring information available on the state o f the forests in Ghana. In one case, the commission removed documents from the FC website that showed the rapid degradation of forest reserves in recent years. Furthermore, resource allocation processes are not fully transparent. The board of the commission and the TREC make critical-and sometimes controversial-decisions on the allocation o f public resources, but the minutes of those meetings are not made public. There also do not exist measures to prevent personal conflicts of interest. For example, officers and board members should be asked to disclose potential conflicts of interest, to avoid circumstances where they or their family membersundertake transactions with the FC (e.g., supplying of tools, tires, etc., or biddingon TUCs). A possible remedy would be to make the lists of concession and TUC holders public (even the terms o f the concession). Another possible option to increased transparency would be to publicly list firms in default o f payment or without a property mark (without a valid property mark, a contractor cannot operate a concession-reserve or off reserve). Property marks have to be renewed every six months at a fee of 400,000 cedis (about US$44.4) per renewal. Although intendedas a check to prevent the late payment o f royalties and other fees, the number of property marks has increased recently to more than 1,000. FC officials believe that this is not happening becausenew entrants are chasing a dwindlingtimber resource, butbecausecontractors are usingthem as ameansto avoidpayment yet still continue to extract timber. 71. Nonetheless, there have again been positive changes, where the GoG has taken important steps to improve the monitoring and transparency in the forest sector. The FC has introduced a measure to enhance the transparency in the disbursement of forest proceeds, namely, the quarterly (or half-yearly) publication o f the disbursement of stumpage fees, published by the OASL and FC since 2003. The reports are printed and also placed on the FC website. There are cases where this has empowered communities to hold the stools and traditional authorities more accountable for the use o f the transferred funds. Furthermore, MoFEP has institutedquarterly budget reviews beginningwith the 2006 budget implementationto allow for monitoringand evaluation ofprojections andbudget outcomes 72. Past program support has paidtoo little attentionto strengthening checks and balances in the naturalresource sectors, includingthe roles for Parliament,civil society, and the boards of the naturalresource commissions. Given the inherent potential for rent-seeking behavior, it is particularly important that forestry and other extractive industries have institutional checks and balances. Only recently has this received attention, but on too limited a scale. The Parliamentary Select Committee on Lands and Forestry was supported by DFID (however, the engagement o f Parliament was critical to the passage of competitive biddinglegislation, reported to be the first time that a forestry motion was passed unanimouslyinParliament). Civil society is emerging as a potential advocate for better accountability and transparency in the sector. The boards of all the natural resource commissions have considerable influence-good and bad-on the successful outcome o f policies, but have been largely ignored. (This reflects a wider problem with public sector corporate governance in Ghana, which has been neglected both at sector level and in public sector reforms.) Support for all these areas must be broadened and sustained. -45 - Box3-6: PublicSector CorporateGovernanceinGhana Evidence abounds of poor corporate governance in Ghana. A review by Transparency International (TI), which concluded that there hadbeenvery little substantial change inanticorruption arrangements since 2000, also noted that corporate public governance remained a challenge: "There has also been a failure to devise and promulgate a credible code o f conduct for public officials, to reform and improve the weak public official asset declaration regulations. Corporate governance and conflict of interest avoidance rules have also been neglected, which means that Ghana i s pursuinganti-corruption without vital preventive components. Under present regulations, public office holder assets are infrequently declared once every four years, they are declared behind closed doors, they are not ordinarily accessible to the public, and they are lodged with agencies that are not adequately independent o f the executive branch. Thus, the declarations fail the essential tests of ease of verifiability and monitoring." Source: Gyimah-Boadi2004, p.20. F. Institutional Overlaps andConstraints 73. The relativeroles of the Ministry, the Boardof the ForestryCommission, and the Forestry Commission managers are not well defined in the Forestry Commission Act. There have been attempts to resolve ambiguities, and even a workshop leading to a signed tripartite memorandum o f understanding. As a result there i s competition between the FC and the board regarding policy matters; the Ministry engages in operations (e.g., HIPC plantations), and the Board itself meets frequently and becomes too involved inFC day-to-day management and operational decision-making. 74. In addition to being a regulator, the FC is a manager of state-owned forest assets, and collector of forest taxes; the inherentconflictsof interest generatedby these multipleroles are also not recognized in the law that sets up the FC. Although many mills were privatized, the GoG still retains ownership of three mills albeit it unclearly: they fall under the tutelage of the FC, although they do not appear inthe FC accounts. Large areas of teak, cedrella, and gmelina plantations created inthe Busia years remain under direct management by the FC. Proposals in the mid-1990s to privatize or commercialize those plantations foundered upon concerns over low valuations, and after opposition from FDand ministrymanagersover the loss of assets. The sales of standing timber from these plantations are proving to be an important source o f income for the FC in2006 becauseof the collapse ofnormal revenue collection. Plantations directly established in 2003-2004 by the MLF, using HIPC funds, have also been transferred to the FC. 75. When Act 571 established the FC as a "corporate body" and enjoined it to operate in a more business-like manner, some came to believe that the commission should operate like a business. As a result, there has beenno serious questioning of the FC's role with respect to plantations; the commission is seen as being requiredto be in the plantation business in order to make money for itself. One symptom o f this ethos: the FC's website address announces to the world that the FC i s a dot.com (the convention for profit-making companies) rather than a dot.org (the commonly used address for independent organizations). 76. Significant problems also exist in the ability of the GoG to deliver on programgoals. For instance, the MDAs suffer from poor morale and low capabilities, inpart attributable to the structure of the civil service. Salaries are low, benefits are not monetized, and (senior) staff rely on project allowances and top-ups. These structural problems are beingtackled, but the political difficulty of reformmeans that the GoGcan only move at a limitedpace. There exists an inability -or reluctance-to hire goodpeople within the public service. Senior-level financial staff are a keyrequirement, and a good example. The FC openly recruited for a finance director, found good candidates, but in the end was unwilling to pay commercial salaries (which would have beenmore than the salary o f the chief executive). As a result, the FC's financial capability i s hobbled. Furthermore, the MDAs have weak financial management and - 46 - procurement skills. The skills of current staff are often overestimated, and the situation has not been helpedby the legacy of past projects where consultants have performed these jobs. As a result, there are whole cadres of senior and middlemanagement who lack practical experience inwriting TORS,tendering, and managing consultants, lawyers, and other service providers. Inaddition, progress has been disrupted when key "reformist" individuals within the forestry and wildlife sector have been lost through transfer, removal from office, or death. Inthe last decade, at least six such instances have occurred. Finally, there has been the problem of adoption of overly technocratic, consultant, or donor-led interventions, which have lackedpolitical support. Such programs have notworked inGhana (World Bank 2005). G. Public Expenditures Review 77. In preparing the public expenditure analysis within this CEA, we have found significant constraintsto effective management and monitoringof publicfinances within the sector. Neither the FCheadquartersnor the MLFMnor MoFEPhas a complete picture, and estimatesconflict. 78. Financial information captured by the FC is incomplete. Inparticular, funds from some DP projects have continued to be channeled through separate accounts managed by project accountants, resulting in "enclave accounting" for those projects. FC finance staff have had difficulty obtained complete and regular updates. Some staff on the payroll (notably those who were former civil service department staff) still have their personal emoluments directly paid. 79. Budget information is inconsistent. A comprehensive analysis of past public expenditure trends in the forestry and wildlife sector is difficult because the fragmented budget has created multiple data sources. The result i s both inconsistency in and unreliability of data on executed expenditure^.'^ For example, budget information derived from the MLFM and the MoFEP i s inconsistent. According to the MoFEP (Government of Ghana 2005a) the budget envelope for the MLFMamounts to 415 billion cedis (excluding HIPC assistance), or approximately US$ 46 million. In contrast, the MLFM reports an allocated budget of 546 billion cedis (without HIPC assistance) in2005, or US$ 60.6 million. Information on past budget performance made available by the MLFM i s often not complete, in particular regarding earlier years (2000-2003). The MoFEP also does not seem to fully capture all information about IGFs and external financing,especially grants and other expenditures made directly available to the sector.16 80. The mix of revenues in the sector is relatively complex, a fact that MoFEP has not always understood well. Over the last year, however, the Non-Tax Revenue Unit has become much more engaged, including participation in the Steering Committee of the Public Financial Management team in the FC (which i s overseeing the roll-out o f a decentralized financial management system). 81. MoFEP's data reconciliation at the levelof the MLFMis problematic.The ministry includes 11 departments involved in the land, forestry, and mining sector. Recently, the three mining agencies have been included following a merger with the Ministryof Mines in2005. The Finance Department has struggled to collect and consolidate available budget data (allocation and execution data, recurrent and capital, by financing source for the period 2000-2005) across all departments. Most o f the data collection for the CEA exercise has been manual; the MLFMdoes not have a comprehensive computerizeddatabase 15Different sources fiance the budget ofthe MLFM, namely, the consolidated fund (CF), the IGF, HIPC funds, and donor assistance. l6Prior to 2005, the MOFEP either didnot capture or only partially captured expenditures fundedthrough the IGFs, statutory funds, and donor aid. Information on the amount of IGFs collected, retained, and lodged by the sector ministries i s documented by the recently created Non-Tax RevenueUnit at the MOFEP since 2002. However, prior to 2005, no information was published on the utilization of the retained IGFs at the sector ministry level or in Ghana's Appropriation Act. Likewise, donor assistance has been reported in the Appropriation Act (by economic classification) only since 2004. - 47 - system comprising the Ministry's budget planning and implementation (including the CF, HIPC funds, IGFs, and donor assistanceandaccessibleby all the departments). 82. Multiple processesdrive the information flow betweenthe sector agencies. Ad hoc reports, often extracted by handfrom computerizeddata, confusethe situation. As aresult, confidence inthe financial information between the agencies i s at a low level. In part, this will contribute to low budget execution, although Killick (2005) reported deviations between budget estimates and actual spending of 42 percent and 68 percent inthe ministriesof Education and Health, respectively. 83. Most of the MLFM budget -40 percent in 20054s met by donor aid. 19 percent of the MLFMbudget is financed bythe CF, 29 percent bythe IGF, 12percent byHIPCresources.TheForestry Commission, as the main executing agency incharge of the forestry and wildlife budget, accounted for 37 percent o f the total MLFM budget in 2005. As Table 3-6 below shows: (a) the execution rate of the MLFMbudgetis very low (56 percent) in2004; (b) the poor performance can bemainly attributedto the low implementationo f donor aid (around 40 percent); (c) execution of the CF and HIPC i s also below the national average in 2004; and (d) total budgetary allocations to the MLFM have declined by nearly 8 percent between 2004 and 2005. In particular, a revised downward projection in the collection o f IGFs (by 22 percent between 2004 and 2005) has contributed significantly to the drop in total budgetary allocations. This stems from the FC projections that have struggledto implement the competitive bidding for the allocations of timber rightssince 2004. Table 3-6: Fundingofthe MLFMBudgetby Sourcesof Funding, 2004 and2005 (inmillionsof US%) 2004 2005 2004105 Budget Release Execution Budget Share of Growth rate rate the budget (inpercent) (in (inpercent) percent) Total 74.4 41.3 55.6 68.8 100.0 -7.5 CF 10.7 7.84 73.0 12.9 18.7 19.9 IGF 25.6 15.1 59.0 19.9 28.9 -22.4 HIPC 9.89 7.26 73.3 8.32 12.1 -15.9 Donor 28.12 11.11 39.5 27.75 40.3 -1.3 Source: MLFM data. 84. The fragmentation of the budget complicates MoFEP's financial oversight. More than 80 percent of the MLFM budget i s financed from funds that have formed only part of the regular budget process over the past years. This level o fbudget fragmentation complicates budget planning and increases transaction cost (e.g., related to the involvement o f multiple agencies) and operational inefficiencies (e.g., becauseof limitedadjustment o f the budget related to the ring-fencing nature o f donor- and IGF-financed projects, or because of donor funding modalities). Efforts have beenmade since 2004 to improve the budget unity and transparency, including requirementsthat (a) sector ministries (as per the Financial Administration Act) remit profits to the budget and disclose their IGFs by economic classification in the 2005 budget; (b) sector ministries report on the allocation of HIPC resources in the 2006 budget; and (c) the 2005 budget statement includes -for the first time -the disbursementof donor programsby loanandgrant. 85. The programming and expenditure framework embedded in the GPRS Iand 11adds a further levelof complexity and is not alignedwith the budget. The GPRS I(2003-2005) and I1(2006- 2009) seek to provide the broad programming and expenditure framework for the forestry sector in line with government's national development agenda. The GPRS Iexpenditure framework falls short in its alignment with the MLFM budget. The GPRS I1 costing is also not yet aligned with the priority -48 - interventions identified for the forestry sector in the strategy document. Both GPRS Iand I1are being implementedthrough investmentprograms financed largely by donor assistance. 86. The role of HIPC funds is contr~versial.'~ the context of the GPRS I, commitment In Ghana's inthe forestry and wildlife sector focuses on re-afforestation. Hence, government decidedto use a share of the resourcesreleased by the debt reliefto boost the funding o f its Forest PlantationProgramin2003." The Forest Plantation Program was created in 2002 through a President's Special Initiative. Between 2003 and 2004, the MLFMbenefited on average from 5 percent o f total HIPC funds. The objectives of the programare to plant trees in degraded forest areas and to create employment for depressedrural and urban communities. Table 3-7: Contributionof HIPC Resourcesto the MLFMRe-afforestationProgram, 2003-2005 2003 2004 2005 Planned Actual Planned Actual Planned Actual HIPC funds allocatedto re- 3.77 4.63 9.89 7.25 8.32 6.47 afforestationprogram(in millions o fUS$) HIPC funds (as a share o f 13.3 17.6 12.1 total MLFMbudgeta) HIPC funds allocatedto re- 6.3% 6.0% 7.4% 4.0% 4.7% 5.0% afforestatiodplantation program (as a share of total HIPC funds, inpercent) Memo Total HIPC resources (in 60.33 76.81 133.73 180.71 176.85 128.56 millions o f US$) Executionrate o ftotal HIPC 127.3 135.1 72.7 resources (inpercentage) a. Including CF, IGF, HIPC, and donor assistance. Source: Datafiom MoFEP, MLFM, 87. In 2002, the FC was initially assigned to implement 30 billioncedis (US$3.3 million) out of the total 53 billioncedis (US$ 5.9 million)Forest PlantationProgram. Since 2003, HIPC resources have financed the program, and the programadministration was brought back to the MLFMand put under the direct supervision of the minister. The FC was seen as too weak by the ministry to obtain tangible results. Since then, the program has created some controversy. Over the past years, it has focused more on the creation o f employment opportunities, notably in urban areas, than on the initial objective o f re-afforestation. In addition, the program paid higher salaries, which crowded out other efforts by the FC to promote private sector initiatives on plantation. Recently the ministry began to acknowledge that it should focus on its core function ofpolicy-making, regulation, and supervision, and it i s inthe process of transferringthe programto the FC in2006. 88. Over the past two decades, several studies have shown that stumpage fees have only captureda smallpercentageof the economicrentfrom forestry.IgSettingstumpagefeesZois not based l7Ghana reached the DecisionPoint under the Enhanced HIPC Initiative in2002 and the completion point in2004. l8For Ghana, joining the HIPC Initiative implied that roughly US$2,186 million inNPV terms indebt relief would be released over a period of 20 years. Using 20 percent of debt relief for reducing its domestic debt, the country has beenable to reduce its annual averagedebt repayment fromUS$392 millionto US$149 per annum. l9Between 1992 and 1997, the stumpage rates halved in constant cedi terms, whereas the nominal rate for timber tree species doubled over the same period. According to a study conducted in 2001, it was estimated that the - 49 - on market prices; it i s set administratively by the Forestry legislation (last determined by the Timber Resource Management Act in 1998). A recent study (Birikorang and Rhein, 2004) on the forest charges concluded that the residual forest tax that remains chargeable to the timber industry amounts to US$10.5 million (Birikorang and Rhein 2005). The government's failure to update stumpage rates i s rooted in Ghana's political economy. Because of increasing pressure from the donor community, the FC committed itself to ensure quarterly adjustment and application o f stumpage fees inaccordance with FOBprices and currency changes. In2004, the stumpage fee was revised from a low of 2.5 percent FOB in2003 to 7.0 percent FOB in2004. 89. Although the government is unambiguously committed to competitive allocation of timber resources through market mechanisms, only 4 percent (1,400 k m z ) of the existingtimber rightshave been allocated competitively and pay the legally prescribed fees. Concessions allocated by administrative mechanisms, which account for about 50 percent (approximately 18,000 h)o f production forests, have not beenconverted to TUCs, as prescribed by the law, and do not pay the fees set out by the legislation. Discretionary allocated Salvage Permits (SPs) and TUPSin off-reserves, which account for 40 percent (14,000 h) o fproduction forests, operate largely outside o f the legal framework. 90. The FC's role as a fee collector in the sector has been severely curtailed as a result of its own weak capacity, corrupt behavior by the timber operators, and illegal logging by farmers and chainsaw operators. According to an internal FC report: (a) more than 50 percent of the projected stumpage revenues between 2000 and 2003 were not invoiced because of illegal harvesting; (b) in2003, the average invoiced stumpage rate was only US$2.9/m3 compared with the approved average stumpage rate o f US$7.5/m3; (c) about 10 percent of the invoiced stumpage i s not collected; and (d) about 30 percent o f the export levy i s not collected (Government of Ghana 2005b). The main agency within the FC incharge of collecting the stumpage fees is the FSD.While low collection can be partially attributed to limitedstaff andresourcesat the FSD, further evidence suggest that insome cases the FC staff were open to fraud (e.g., false measurement, improper supervision, etc.) for monetary gain. 91. The governance challenges that underpin the sectors problems (and are described at the start of this section) ultimately lead to a vicious circle: the potential for rent in high-value timber attracts bad governance, which-exacerbated by a range of institutional defects-leads to loss o f revenues to the state. This inturn cripples the sector regulator, and prevents the state from exercising the control function neededto extract the potential rent from the sector. 92. Reversingany vicious circle takes time. However, small, but significant, successes inthe sector demonstrate that a sustained effort-on a range of fronts-can deliver the policy reforms espousedinthe 1994policy. The next section sets out recommendations and a comprehensive road map o f actions. H. Forestry andWildlife inthe GPRS 93. The first two Growth and Poverty Reduction Strategies in Ghana have focused little on correctingthe causes of environmentaldamage, and both had different approaches. The first Ghana Poverty Reduction Strategy (GPRS I)focused on poverty reduction and a pro-poor agenda. The second, GPRS 11, places more emphasis on growth-inducing policies and programs as a means to wealth creation and poverty reduction. Forestry Commission could have lost about US$6 million inrevenue over the respective period (Birikorang 2001). Another study concluded that the government's failure to revise stumpage rates reduced the collected revenues by one third compared with what could have beencollected in 2000/2001 (Rhein 2002). The use of both the cedi and dollar amount shouldbe standardized for all monetary citations, 2o Stumpage value represents the value o f standing timber after all production costs have been deducted. It i s also the maximum amount, ina competitive market, that a timber utilization contract (TUC) holder will be willing to pay for harvesting a tree or stand (Birikorang and Rhein 2005). - 50 - 94. The forestry and wildlife sector is not well recognized in GPRS 11as one capable of supporting growth. Rather it appears in the context of improving the business and investment environment for agriculture-led growth and inparticular "modernized agriculture" (where it appears as a subheading under the Restoration of degraded environments). 95. The analysis inthe GPRS 11does not fully address the underlying causes of environmental degradation. Itidentifies environmentaldegradation as a major impedimentto increased productivity and sustainable agriculture, identifyingits root cause as "traditional farming systems." The text contains little explicit recognition o f the informal nature of much rural economic activity. For example, the bushmeat trade, reliably valued at up to US$200 300 million per annum which is of a dispersed nature and has effectively contributed to rural-particularly poor rural-livelihoods, goes unmentioned. - 51 - Box 3-7: Forestry, Wildlife, and GPRS 11:ContrastingMessages A review o f the environmental dimensions o f the first GPRS showed the existence o f highly contrasting messages, and a dichotomy o f interests: "[Wlhile the GPRS addresses forestry as an environmental issue, mining as a means o f increasing foreign revenue and land reform as the conversion o f plural systems o f land `ownership' into commercial interests, it retains the overall `structure' o f the system and keeps political and powerful interests compartmentalized." By viewing the environment through a conventional and sectoral approach, "the types o f narratives that are included.. .act to limit the scope for the interpretation o f environmental problems and the possibilities o f change" (Gadzekpo and Waldman 2005). Inthe GPRS II-and wider GoGpolicy-similar conflicting message remain unexplored, for example: Concentrating on the modernization growth agenda, at the risk o f excluding rural populations. Growth must lead economic development, but the level at which rural people can engage in the development process is critical to lifting them out o f poverty. Studies at the local level have shown that policy in practice has disenfranchised rural people, sometimes demonizing them and their activities, which, in reality, are often a rational response to externally imposed constraints. The GPRS 11attribution that "traditional farming" i s the cause o f environmental degradation is mirrored in the common statements about the "menaces" o f chainsaw logging, Fulani herdsmen, galamsey miners, or bushmeat hunting. Addressing environmental symptoms rather than underlying causes, example: 0 Investing in plantations in degraded forest reserves, without tackling the institutional and policy factors that led to the loss o f forest in the first place (underpricing o f timber, poor governance, reluctance to devolve authority for forest management). 0 Seeking alternative livelihoods (e.g., bee-keeping) rather than developing the potential o f existing markets (e.g., bushmeat from off-reserves, which appears to be sustainable from fast- reproducing species inthe off-reserve areas). Focusing on spending to mitigate environmental degradation, rather than capturing new values from forests. The latter requires policy effort and innovation to incorporate in planning, or capture locally, external ecosystem function values (water catchment, climate amelioration, carbon sequestration, biodiversity, future use values, access to genetic resources, and intellectual property rights). 96. There is a riskthat GPRS I1focuses GoG spendingon program activitiesrather than onthe creation of an enabling policy environment. Because the GPRS I1 costing under the focus area restoration o f degraded environment and NRM has a different classification o f priority interventions (see Table 3.8 below), assessing the level o f funding forecast to support the implementation of the forestry programi s not possible. The misalignment between the costing and the forestry programs also hinders the monitoring and evaluation o f the funding and implementation o f the priority interventions, and raises questions about the usefulness o f the GPRS costing. - 52 - Table3-8: GPRS Costingof the FocusArea Restorationof DegradedEnvironment and NRM, 2006-2009 (in millionsof US$) Goal 2006 2007 2008 2009 Total Ensure the restoration of 33.5 33.5 21.5 19.3 107.9 degraded natural resources Promote sustainable natural 3.9 3.9 3.9 3.5 15.2 resource management Buildthe requisite institutions 7.1 7.1 6.5 5.9 26.6 and strengthen the regulatory framework to ensure sustainable natural resource management Buildregional and global 0.0 0.0 0.0 0.0 0.0 linkages toward the management of natural resource management Restoration of degraded 44.6 44.6 31.9 28.7 149.8 environment and natural resource management Memo Private sector competitiveness 751.8 764.8 704.4 633.9 2,854.9 Restoration of degraded 5.9 5.8 4.5 4.5 5.2 environmentand natural resource managementas a share ofprivate sector competitiveness Grand total 2,066.4 2,083.2 2,039.5 1,874.0 8,063.1 Restoration of degraded 2.2 2.I 1.6 1.5 1.9 environmentand natural resource managementas a share of grand total Source: GoG 2005d (GPRS II). 97. Priority interventions in the forestry sector are centered around the following measures: (a) to encourage reforestation of degraded forest and off-reserve areas, (b) to promote the development and use of alternative wood products as well as plantatiodwoodlot development among communities, (c) to manage and enhance Ghana's land and permanent estate of forest and wildlife protected areas, the efficiency of which will depend on increased capacity o f the FC and WD, (d) to ensure that every socioeconomic activity is consistent with sound land management practices, and (e) to develop a sustainable strategy for forest and wildlife to support ecotourism (perhaps through public-private partnerships) and generate foreign exchange. Key FindingsandRecommendations 98. Promote plantation development. Plantation activities have recently been harmonized, and the anomaly o f ministry involvement in operational plantation afforestation through HIPC funding has now ended. An immediate need exists to confirm and clarify the rights of participants inthe recent plantation programs, and work toward creating an enabling environment for commercial and small-scale private sector investment inforests. - 53 - 99. Restructure the timber industry. The policy goal of promoting tertiary and added-value processing i s not being achieved. Players in the industry are undertaking concerted lobbying efforts to capture GoG policy-making in order to reduce their payment of forest taxes; the specter ofjob losses i s still being used as a rationale to delay change. Industry itself needs to be encouraged to put forward proposals to deal with the overcapacity inthe industryrelative to a "dwindling" resource and the limited investment inadded-value processing. 100. Provide sustainable financing. High priority should be given to an agreed financial arrangement-ideally a M o U between MoFEP, MLFM, and FC-that provides secure, predictable and sustainable financing for the operations of all divisions of the Forestry Commission. This arrangement mustincludeprovision for the costs of strengthenedwildlife PAmanagement. More DetailedRecommendations A. Forests and Wildlife Can ContributeMoreto Growth 101. Although depleted, the remaining forest and wildlife assets represent important opportunities for the GoG to: (i)increase value addition in the timber-processing industry, and create jobs with manufacturing skills-not just commodity product skills (an opportunity largely squandered to date); (ii)increase rural employment and livelihoods through local management of off-reserve forests, through mechanisms such as dedicated forests or CREMAs, and through more aggressive NTFP development and marketing; (iii) support investments in plantation timber, in eco-tourism, and wildlife facilities (though the government needs to improve at managing FDI in a transparent way); (iv) capture economic and financial rents now heldby industry, thereby ensuring both an effective regulator and a broader tax base; and, inthe future; and (v) capture new ecosystems values, including carbon values. 102. Ifthese changes canberealized, they willprovideanopportunity for: Demonstrating that Ghana can escape from the commodity trap. The GPRS 11's espoused policy i s to encourage value-added agricultural processing. So far, this same policy has failed in the timber subsector, where the raw input (timber) was available in abundance. Policy now in practice in Ghana does not do enough to encourage a shift from investment in "extraction" to investmentin"value-adding." Providing a bufler as the economy restructures. The Ghanaian economy i s moving from primary and extractive industries (agriculture, timber,mining)to agro-processing, manufacturing, and services. This will require a change to a new level o f human capital. Timber processing could, and should, contribute to this change, given the size o f the industryworkforce. However, the perverse incentives that continue to favor low value-added timber processing do little to shift the workforce from cheap low-skilled labor, to semiskilledand semiprofessional. Today's timber policies are therefore squandering the very assets that can be used to buildmanufacturing skills, tomorrow's jobs, and decent work for the future. Broadening the tax base, by having MoFEP wrest control of timber rent from the industry. MoFEP budgetprojections assume that timber revenues will rise by 6 percent per year. This i s an unrealistic assumption given a rapidly diminishing resource base, although more plantation- grown timber i s now starting to become available. Moreover, MLFM and MoFEP policies in practice do not always help. Timber processors avoid tax within export-processing zones, the FC i s prevented from collecting unpaid debts, and no agreed memorandum o f understanding (MoU) exists on the financing framework for funding the work of the FC as regulator and manager o f forest and wildlife resources, Encouraging Ghanaian enterprise and investment. The greatest opportunity i s to provide an enabling environment for rural microenterprise, and better, more diversified incomes for small - 54 - farmers to invest and better manage forest resources on a small-scale. In addition, Ghanaian participation in eco-tourism and similar projects - in particular, through public-private partnerships for ecotourism development - can develop national commercial skills in specialist and high-value tourism management. While foreign direct investment (FDI) i s essential for the largest projects, FDI without tangible domestic investment i s politically fragile. However, an investmentclimate for all firms must strike a balance between the needs of enterprises and the wider needs of society (see Box 3-8) Box 3-8: RegulatingPrivateInvestment-The Underlying GovernanceChallenge Inapplying itspolicy ofbusiness andprivate sector-led economic growth, the GoG must deal witha basic tension, well described inthe World Bank's 2005 WDR on investment: ``Firms are the primary creators o f wealth, and a good investment climate must respond to their needs. However, a sound investment climate serves society as a whole, and the preferences o f the two can diverge...."Responding to the resulting tensions creates four practical challenges: Restraining rent seeking, so that elites do not capture the processeso fpolicy debate, law making, and the implementation o fpolicies inorder to maximize advantage for themselves. Establishing credibility, so that the uncertainties o f investment are reduced and the "rules o f the game" are clear. Fostering public trust and legitimacy, so that citizens can assume that government interactions with the private sector are based on sound regulation and good contracts, and not on dubious public-private "deals." Government needs not only to set the rules o fthe game, but also to follow them. Ensuringpolicy responses reflect a good institutionalfit. These issues are most obvious in the forest and mining sectors, but also apply to policies for ago- 1 [processing investment, land administration reform, and investmentinurban housing and infrastructure. Source: Adaptedfiom WorldBank (2006b), p. 36 Creating well-regulated markets for a "golden age of business," with strong links to legal producers and customers. Although no one likes to admit it, all forms o f poor governance are present in the sector: petty bribery, corrupt deals, and state capture (see Hellman et al. 2000 for definitions). However, the leakages and negative impact o f poor governance are increasingly recognized (NEPAD, 2005; Booth et al., 2005). The forest sector i s particularly vulnerable. This i s the result o f the high value o f certain Ghanaian forest products (notably timber, but also some wildlife), together with a weak regulator, policies in practice that deviate from the espoused policy, loopholes in legislation, disregard for legislative requirements, and little incentive for communities to regulate illegal activity at local level. The shift in international markets toward legal and sustainable timber (e.g., the current VPA proposal) therefore represents a major opportunity for the GoG to "clean up" the sector, secure long-term markets for Ghanaian forest products, and enable a well-regulatedand competitive industry Helping to deepen democratic processes, and reduce the potential for sparking rural conflict. For many decades, the rights of access to natural resources (trees, wildlife, minerals, and land) have been contested. A combination of population growth and new demands on land has brought this to the fore. The right mix of policies-and policy consultation processes-an ensure more equitable sharing o f benefits from naturalresources. Supporting more eficient government. Some aspects of law and institutions are unworkable; for example, having a centralized institution such as the FC's WD enforce compliance for hunting licenses i s impossible. Given limitedbudgetary and staff resources, CBNRM innovations such as - 55 - dedicated forests and CREMAs are a pragmatic solution to the challenge o f regulating the use o f natural resources across the whole o f Ghana, particularly off-reserve. B. Gettingthe Balance Right 103. Thereis a danger that policyprioritiesbecome dominatedby particular focuses or agendas. Our main recommendation is for balance in forest and wildlife policies, in order to ensure a diversified platform for economic growth, a more secure resource base, and less vulnerability. World cocoa prices are at 40-year highs and gold at 25-year highs. Ifmarkets revert to the mean, current growth rates may not be sustainable. Five primary areas o f balance are: Governance vs. technocratic solutions. Opportunitiesare present for improving control over the forestry and wildlife sectors through interventions such as: log tracking and legality assurance schemes, the proposed trade agreement on illegal timber trade, the introduction o f improved wildlife-tracking systems inPAS,and the introduction o f private management to wildlife tourism lodges or plantation. However, all o f these interventions must be nested within a governance and political economy agenda, in order to ensure that the hoped-for outcomes are achieved, and opportunities for tackling community or benefit-sharing issues are not missed. Amelioration vs.jixing the underlying causes. Reforestation and plantation programs (possibly including enrichment planting o f trees), ,wildlife protection, and intensified fire patrols should be undertaken, and with some urgency. After all, along with agricultural practices, forest fires have been the immediate cause o f most forest degradation. However, unless attention is also given to tackling the reasons why the forest disappeared inthe first place (including intentional bushfires), success i s not assured. Spending vs. enabling environment. Spending i s relatively easy, visible, and fast; whereas crafting policies, reforms, laws, and regulations i s more difficult, not very visible, challenging, and slow. Yet both are necessary. The HIPC Plantation Program illustrates this point well. HIPC funds were spent rapidly to expand planted areas, but the MLFMhas lagged behind in creating the enabling legislation for private sector plantation investment, and for secure property rights for those communities who participated in modified taungya systems. Placing operational responsibility for the HIPC plantations within the ministry has also diverted the ministry from its core policy function. Modernization agenda vs. improving existing systems. The GPRS I1firmly places forestry and wildlife within a "modernizing agriculture" context. Important opportunities exist for the development o f export-led crops (oil palm, pineapple, etc.) and for attracting investment inagro- processing. These opportunities can, however, be pursued at the same time that forest and wildlife resources are replenished. Centralized authority vs. devolved authority. Forest and wildlife management i s not hlly decentralized, as was envisaged inthe local government act. However, the FC has an opportunity to genuinely delegate authority, particularly in the off-reserve areas. Centralized management o f PASand FRs can continue (although the FChas not covered itself inglory or proven itself a great custodian o f the nation's forests). Through DFs and CREMAs, mechanisms exist that can transfer management responsibility, reduce costs o f management, and improve benefits to communities and the health o f the forest and support the PA system. - 56 - C. Implications for the GoG's DevelopmentPartners 104. Since governance i s a major concern in the sector, changing donor priorities have significant consequences. The DPs' stance needs to be coherent, consistent, and committed over the medium and long term. Short-term project interventions may do more harm than good when they either support elites or cushion some o f the changes needed (i.e., moral hazard problems). DPs also need to be more aware o f the political economy: there are factions at all levels that either support reform or support the status quo, and it is not always easy to disentangle those interests, especially when they are overlaid bytraditional allegiances or patronage networks. 105. Nonetheless, donor coordination in the natural resources sector has improved significantly following the establishment of the Environment and Natural Resource Management (ENRM) Group of Development Partners. The group aims to help institutionalize a dialogue on NRh4 issues, improve harmonization, and jointly monitor policy reforms in the sector. Moreover, the group shares information between its members and the GoG, in order to reduce the potential for duplication of effort. Thisprogress is valuable andneeds to be continued and consolidatedbyboththe GoG andDPs. 106. Taken together, the opportunities set out above are a compelling rationale for DP support to the forest and wildlife sector. It is not difficult to construct the right mix of actions: coherent policies (both espoused and in practice), smart fiscal incentives, and clear signals that governance defects in the sector will no longer be tolerated. However, history sends a note o f caution. The difficulties of passing laws and regulations, and the avoidance of laws or challenges, all show that in Ghana, vested interests aligned-however temporarily-to political power can easily overcome, avoid, or halt those actions. 107. The opportunity for DPs is to support the G o G in its efforts to reform the sector, but in ways that learn from the past. Some clear lessons are: Bring "environmental governance" into the mainstream. If DPs are to genuinely address the degradation o f forests and wildlife inGhana, it must mean dealing with the underlying causes of the degradation, not just the symptoms. Those underlyingcauses relate to the rights, revenues, costs, and the allocation of benefits associatedwith forest resources. Inshort, who wins and who loses i s clearly a governance issue. Recognize the political dimensions of reform of theforest and wildlife sector in Ghana. As in many other counties, support from donors has tended to be technocratic, ahistoric, apolitical, and acultural in its approach (Levy 2004; Unsworth 2002, 2005; World Bank 2004). New analyses from Ghana are available that can inform DPs (Gadzekpo and Waldman 2005; Booth et al. 2005; Killick 2005), and future investments needto factor inthe findings of those analyses. 0 Recognize thepolicy implementation risks. Good policies and laws are not enough. They can be ignored, subverted, or avoided. Good process i s also critical to good outcomes. For example, the concessioning of wildlife lodges or timber must be handled in a way that i s demonstrably fair, open, transparent, competitive, and legal. Indialogue with the GoG, DPs can help ensure that the right resourcesare available within flexible program schedules. Build a coalition of reform. The temptation i s to look for and support individual reformers, but past experience shows this to be a risky route with uncertain prospects. Rather, DPs must make a judgment as to whether there is a sufficient broad-based coalition of reform interests, against whichinvestments inthe forestry andwildlife sector canbeundertaken. 0 Stay the course. Experience shows that reform can be thrown off track, through events, electoral cycles, legal challenges, loss of key players, and periods of "reform overload." DPs are supporting a reformprocess that i s not linear, and engagement mechanisms must be flexible, responsive, and capable of being scaled up or down as appropriate. Disengagement from the forest and wildlife sector inthe face o f short-term disappointments i s risky, for three reasons: first - 57 - it ignores the potential contribution that the sector can make to growth; second, itmay signal that DPs attach low priority to environmental issues; and third, it may imply that they will turn a blind eye to poor governance in general and to "difficult" sectors such as forestry. Analyze the delivery risk, and take steps to reduce that risk. Low rates of budget execution on many NRM projects and program delays, together with reports of very high levels of leakage e1sewhere;l are warning signs of systemic capacity constraints within ministries, departments, agencies, and a dysfunctionalbureaucracy: "Everyone seems to agree that the public service, particularly the civil service, has reached a very low ebb. Incentive structures within the civil service actively discourage initiative and pro-activity. For individuals, the way to move up the system is to avoid mistakes, maintain a low projle and let seniority work its magic. This results in a self- selectionprocess in which those with initiative and drive either do not attempt to enter the public service or are driven out in frustration. There do remain some good, dedicated people within the system. The best of them tend, however, to befrustrated by the absence ofpersonnel management and by nonrecognition" (Booth et al. 2005, p. 5). 108. With the shift from projects to sector programs, policy loans, and direct budget support, the delivery challenge firmly rests with the GoG, as it should. However, DPs will need to pay much more scrutiny to GoG management, financial and procurement systems, and find new ways of strengthening those key functions, while working within GoG structuresrather than project structures. 109. Continue to harmonize. Many o f the institutional challenges facing the GoG lie outside the forestry and wildlife remit. DPs therefore need to work with the GoG both on NRM issues and "outside the NRM box" to address nonsector issues, and in a coordinated way. These external issues could include: evidence-based policy making at the center of government, public sector reform, civil society strengthening, decentralization, and a broader governance agenda (judicial reforms, anticorruption measures, whistle-blowersbill, freedom of information). 110. DPs can contribute much to the challenge of tackling environmental degradation in the forest and wildlife sectors Spendingon investmentprojects, new technologies, and support for capacity buildingare activities that can be readily agreed to. But the principle challenges are ones of policy and legislative reform, policy coherence, stronger budget execution, and revenue collection. DPs cannot be effective unless the opportunities outlined above are grasped by the GoG. Because they challenge political and patronage patterns, progressive steps in this sector demand a minimum depth of "ownership," commonplace though it sounds. D. A RoadMap: 2006-2025 111. The investment needs for the forest and wildlife sector to address the findings and recommendations presented above fall into four categories: (i)policy and regulatory measures (establishing a solid governance framework); (ii)institutional capacity building (building sufficient capacity to get things done); (iii) investment (filling financing gaps ininfrastructure, technologies, or key outputs); and (iv) knowledge management, monitoring, and evaluation (informing policy and regulatory decision making, and monitoringperformance) 112. These investments and an indicative timeframe are set out in the Road Map below, after much consultation. 21For example, pilot expenditure tracker surveys found that only 50 percent o fnonsalary resources ineducation reached schools; inhealth, only 21percent reached clinics (Killick 2005). - 58 - E. FinancingInstruments 113. A mix of financinginstrumentswill be requiredinregardto the sector: 0 Development policy lending. Forestry issues are included in the Fourth Poverty Restructuring Credit (PRSC) and MDBS matrix, with both a budget execution trigger and monitoring o f progress toward achieving a more secure, predictable financing framework for the FC. Inorder to deliver comprehensive reform, , however, long-term, sustained multidonor commitment to a forestry and wildlife environmental governance support program i s necessary. This will be achieved through the NREG development policy operation, which will set out a Program matrix with various objectives to be achieved bythe GoGinthe forestry and wildlife sector. 0 Grants and trust funds can provide flexibility for finding of (a) communities in support o f establishing dedicated forests, CREMAs, and similar opportunities to enhance community involvement in forestry and wildlife resource management, and (b) advocacy organizations that hold government more accountable. 0 Projects can fill short-term (2-5 year) gaps in a program, but need to be nested within a sector program, to the extent that they are largely invisible within the program and contribute to wider program goals. 114. To work well, however, this mixwill require muchmore effective aid harmonization. - 59 - Y I 4 a I . I M n .H z! .I : .I $2 U 3 I : 0 .I Y I .I Y Y 2 H I m \o I 1 a do 1 d 0 1 v1 * B8 0 1 2. d B .I Ew c, U E 4 Mining Overview and Diagnosis A. MiningSector inGhana 1. Mining is an important economic activity in Ghana, contributing significantly to the country's export earnings, government revenues, and employment. Mineral revenue represented about 4.1 percent of the national GDP and about 9 percent o f government revenues, and the formal miningsector employed some 15,000 workers in 2004 (Minerals Commission, 2004). The Minerals Commission estimates that artisanal and small-scale miners, often called "galamsey," might account for an additional 500,000 people. Many o f those involved inartisanal and small-scale mining(ASM) are women and children, and a significant number of them are informal participants inthe sector. 2. Gold is by far the largest and most important mineral resource in Ghana in terms of production and contribution to government revenues and employment, making up 93 percent of all mining exports and attracting 60 percent of all foreign investment (MC, 2004). The country i s knownto have one of the world's largest gold ore reserves, and its production ranked as 1l* in the world or second in Africa in 2004 (Chamber o f Mines, 2004). 3. Ghana i s also the third leading African producer of manganese ore and a significant producer of bauxite and diamonds, although their contribution to the national economy and government revenues i s much smaller. Total production of manganese, bauxite, and diamonds was worth US$30.2 million, US$10.6 million, and US$26 million, respectively, in2004 (CM, 2004). Limestone, sand and gravel, and salt are also producedinsmaller scales. 4. Despite its rich mineral endowment, Ghana's miningsector stagnatedfor four decades before the 1980s because o f economic, financial, institutional, and legal problems that impeded investment in the sector. However, the mining sector has seen an impressive growth since the launch of the Economic Recovery Program (ERP) in 1983. The program attracted US$4 billion of private investment in the first five years after its inception." 5. As can be seen inFigure 4-1, gold production increased seven-fold from 300,000 oz in 1985 to more than 2 million oz inearly 2000s. Currently, mineral exploration i s continuing at more than 200 sites, and the government has approved 58 mining leases for gold and other minerals; the total land area is approximately 3,000 km2.Seven large- and one medium-scale gold mining companies are currently operational and provide employment to about 15,000 people. The growth rate o f minerals production, however, has slowed down and turned to negative over the last few years. Gold production decreased to 2.0 million oz in 2004, a drop of more than 10 percent. Revenue from gold mining also dropped in 2004 despite a steady price increase o f gold. This could be attributed mainly to decreasing production capacity in several large mines such as Obuasi and Bogoso. Several others face capacity constraints and are estimated to have aremaininglifetime of only a few years without heavy investment. 22See Minerals Commissions,Ghana Minerals Sector Overview, http://www.mincorngh.org/mineralssector/index.html -66- Figure4-1: Gold ProductioninGhana Gold Production in Ghana (oz),1980-2004 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Source: Datafrom Ghana Minerals Commission. 6. Mineral productioninGhana, however, is set to expand as several new mines become operational in the coming years. Among the new entrants is Newmont, the world's largest gold producer, which is developing two projects in Ghana: Ahafo and Akyem, with combined golf reserves estimated at 16 million oz. The International Financial Corporation (IFC) approved a total financial arrangement o f US$125 million for the Ahafo project. The project was approved after a rigorous environmental impact assessment processand i s expected to produce, over a 15-year period, 500,000 oz o f goldper year starting in mid-2006. Estimates forecast the Akyem project generating 300,000 oz of gold annually when production commences inmid-2008. Since gold prices exceedUS$600, the current gold boom i s likely to continue, and Ghana would remain an attractive destination for foreign investment. 7. The government also plans to boost production of other minerals, notably bauxite, with a view to develop an integrated aluminum industryinthe country. Talks are under way with Alcoa, world's largest miningproducer of aluminum, for this venture. A key constraint in further expansion of industrial-scale miningis the lack of an essentialinfrastructure interms ofadequatepower, water, andtransportation. The Ghana Railway Company, the only bulk mineral carrier in Ghana, i s at present in a difficult financial situation, which will need to be addressed to ensure the smooth shipment o f ore from the mines to the Takoradi Port. B. EnvironmentalIssuesAssociated with Industrial-Scale Mining 8. Environmental impacts o f mining activity in general include deforestation, habitat loss, land degradation, and water and air pollution from waste dumps and tailings disposal. All of these impacts have contributed to poverty by negatively affecting livelihoods and health of the poor. Inparticular, the spread of toxic metals to the environment has been a major concern. Cyanide i s commonly used for the recovery of gold from the ore in industrial-scale, hard-rock gold mining in Ghana. Other problems with mininginclude dust and noise pollution from blasting, and risk of water-borne diseases such as malaria from water collected inminepits. Box 4-1 summarizes the impacts of miningdocumented inthe Tarkwa region. - 67 - Box 4-1: Socioeconomic and HealthImpacts of IndustrialMiningActivities inthe Tarkwa Region Tarkwa has nearly a century o f gold mining history and has the largest concentration o f mines in a single district. Out o f 16 large-scale mines inGhana, 8 o f them are located inthe Tarkwa area. Moreover, around 100 registered small-scale gold and diamond mining companies and 600 galamsey workers operate in the area. About 260,000 people lived in the Wassa West District (1994 census). Over the past years, mining has overtaken subsistence and commercial farming as the single largest economic activity inthe area. In2001 a study was conducted to assess the socioeconomic and environmental effects o f the mining sector reforms implemented under the structural adjustment program (1987-1998), with particular reference to affected mining communities in the Tarkwa mining area. The mainresults o f this study were the following: Social impacts. According to the study, the concentration o f mining operations inTarkwa has had serious adverse impacts on the social organization and values o f the people. Following mining investments in Tarkwa, fourteen communities with a population o f more than 30,000 were displaced between 1990 and 1998. Inadequate housing, an increase in youth unemployment, family disorganization, school drop-out rates, prostitution, and drug abuse were found. Inaddition, mining activities resulted inmassive migration o f workers into the area. Environmental impacts. The natural environment has undergone rapid degradation from deforestation. Surface mining concessions have taken over 70 percent o f the total land area in Tarkwa; 40-60 percent o f the companies' concession areas are beingused for mining activities. Furthermore, agriculture lands are degraded, and the decrease o f agriculture land resulted in a shortening o f the fallow period from 10-15 to 2-3 years. In addition, four major problems involving water pollution have been noted inthe Tarkwa mining areas: chemical pollution o f groundwater and streams, siltation through increased sediment load, increased fecal matter, and dewatering effects. Health impacts. The extraction and processing o f gold has also givenrise to various environment-related diseases. The top six diseases in the area during the observed period 1992-1996 were: malaria (mining activities promote environmental modifications that favor malaria vector development), diarrhea (high incidence in the area), skin diseases (related to cyanide andmercury pollution from gold processing), upper respiratory diseases (dust generated by mines includes silica, which causes silicosis and tuberculosis), acute conjunctivitis (related to inadequate dust- suppressing measures), andsexually transmitted diseases (related to the highinflow o f workers). Source: Akabzaa, T.and Darmani, A. "Impact of mining sector investment in Ghana: A Study of the Tarkwa mining region, 2001. 9. Over the past two decades, major players in the mining industry have increasingly recognized both the need and obligation to identify and mitigate the adverse environmental consequences of their activities. Some companies have committedto sustainable development and set higher environmental and social standards than required by regulations. Gold Fields, which has operated in Ghana since 1993, established a foundation in 2002 to promote and facilitate community development and improve the quality of life ofneighboring miningcommunities. For every ounce o f gold produced, US$1will go to the fund; Gold Fields is committed to making an additional annual contribution of 0.5 percent of its profit before tax.23A recent survey showed that miningcompanies do not see the environmentalregulations as a deterrent to their investmentinGhana (Fraser Institute, 2004/2005). 10. Today, most large-scale mining operators have elaborate and comprehensive environmental impact assessment and management plans. Establishing reclamation bonds for mine closure i s also becoming a common practice. Inmany cases, environmental problems in large-scale miningare a legacy of past mining operations andrequire funds to restore or rehabilitate degraded lands, ifthey are reversible at all. InPrestea, for example, roasting o f concentrate caused severe air pollution; the resulting acid rain prevented the revegetation of surrounding hills even after the closure o f the mines, undermining rehabilitation and reclamation efforts. These past behaviors have created a deep-rooted distrust between large miningcompanies and local people. Such distrustand lack of communication often leadto concerns or opposition to the operation regardless ofthe quality of environmentalmanagement plans inplace. 23In2005, the GoldFieldsSouthAfrica Foundation investedUS$1.6 millioninGhana for community development projects (Gold FieldsAnnual Report 2005). - 68 - 11. Inaddition to environmentalimpacts, miningoperations frequently pose social concerns. Large- scale mining operations often cause involuntary resettlement, resulting in loss of land, livelihoods, and resources for local communities. Land and resource rights of indigenous communities in and around mining concessions are often a bone of contention. As surface mining operations become more widespread in Ghana, land-use conflicts are bound to escalate-surface miningusuallyrequires that huge swaths of land be cleared of vegetation, and top soil and soil nutrients are lost. Villagers have often been dispossessed o f their farmlands to make way for mining, resulting in loss of livelihoods and traditional community values and linkages. 12. Concerns of communities and civil society organizations in Ghana in relation to mining are focused mainly on land use. The current system of compensation and rehabilitation has been called into question for several reasons.24First, compensation for land i s not consistent and the owners of similar plots of land may receive significantly different compensation payments. The Land Valuation Board could play a greater harmonization role on this matter. Second, people perceive that they are not compensatedfor all the lost resourcesbecauseonly cash crops are reimbursed, which does not account for biodiversity and natural resource use losses. Third, after mining closure, the lands reclaimed have no or reduced capability to sustain the crops and biodiversity that existed prior to mining. Fourth, Galamsey miners believe they have rights on surface as well as subsurface land, contrary to the law that vests mineral rights with the state. Local chiefs, who are authorities at the local level, often endorse this position. Altogether, local people call into question the existingrights and procedures for miners to access land. These rights are perceivedas unfair and biasedagainst landowners. C. Artisanal and Small-scale Mining(ASM) 13. Inaddition to industrial-scale mining, a significant number of artisanal and small-scale mining (ASM) operations are taking place inGhana. The EPA defines miningactivity inconcessionsof upto 25 ha as small-scale mining, and up to 100 ha as medium-scale mining. Estimates o f numbers working in ASMvary greatly. The Minerals Commissionestimated employment at 500,000 by end 2004, but it is not clear if this is a full-time equivalent. Earlier Hilson (2001) estimated that o f 200,000 people engaged in ASM, only 30,000 operate on legal concessions; women constituted 15 percent of the formal segment of the small-scale labor force, 10 percent of concession holders, but 50 percent of the informal or galamsey workforce. In2004, ASM accounted for some 12percent o f total goldproduction inGhana (MC, 2004). 14. ASM is an important source of livelihood for many poor families and is characterized by poor technological practices with significant environmental, social, and health costs, particularly through the use of mercury for amalgamation (see Box 4-2). Mercury amalgamation - done with bare hands, the waste discarded into streams - i s a serious threat to miners' health and the environment. Constant exposure to mercury underminesminers' healthand increasesmedical costs, which further raises the need for and dependency on mercury to extract more gold (Pardie and Hilson, 2006). A number of studies have observed elevated levels o f mercury in the hair, urine, blood, and nail samples o f people residing in artisanal gold mining communitie~.~~Moreover, field interviews have identified a number o f health problems causedby exposure to mercury.26 24This summarizes the results of a number of interviews and a workshop with civil society representatives held during a World Bank Mission to Accra March27-3 1,2006. 25For example, see NSR (1994), Environmental Impact Assessment o f Small-scale Mining inGhana: Part IPhysical and Biological Aspect, NSR Environmental Consultants, Australia, unpublishedstudies by Rambaudet al., Mercury Exposure inan Artisanal Mining Community inGhana, UNIDO. 26An estimate of environmental damage costs fiom mercury use is not provided because no comparable studies were found. - 69 - Box 4-2: Environmental and Social Aspectsof ASM Workers who crush the ore-bearing rock often do not use facemasks and inhale large amounts o f dust particles. Finely crushed ore i s generally hand-washed along riverbanks, causing widespread water pollution. A health problem of a family member forces women and children to participate inmining activities inorder to pay for living expenses and additional health costs, Women and children predominantly participate insieving, sorting, transport o f ore and water, washing, and processing of the ore. Consequently, they are highly susceptible to chemical dangers, especially with the use o f mercury in gold mining. Also, women often work with young babies tied to their backs and children at their sides. When additional income is needed or alternative childcare or schooling i s unavailable, older children accompany women inmining activities andusually participate inthem. Source: The World Bank, Evaluation of the World Bank Group's Activities in Extractive Industries, Background Paper, Ghana Country Case Study, The WorldBank 2003a. 15. Past efforts to address health and safety concerns have not been very successful, partly because o f either ignorance or skepticism about the danger associated with chemical exposure. Through the Mining Sector Development and Environment Project, the World Bank provided glass retorts to reduce the harmful effect o f mercury, but the project failed to make a meaningful impact. Artisanal and small-scale miners were dissatisfied not only with the size and fkagility o f the products, but also with the price (about US$60), despite the two-thirds subsidy from the Mineral Commission. Identifying and providing more comprehensive strategies to deal with A S M technical, financial, environmental, social, and health programs i s imperative for a sustainable and socially responsible miningdevelopment inGhana. D. Relationship andConflicts betweenLarge-Scale MiningandASM 16. Seasonal small-scale and artisan mining activities have been coexisting with agriculture and husbandry for centuries in Ghana, but the nature o f these mining activities has changed with the entry of large-scale mining companies. The lure o f potential higher incomes in mining does appear to encourage young men in particular to engage in small-scale mining on a more permanent basis. While poverty and the lack o f livelihood i s a major underlying cause for galamsey activity, it i s important to note that significant numbers o f rural inhabitants are attracted to artisanal and small-scale mining because o f the income and independence resulting from these activities. 17. Today, the great majority o f A S M operations are related inone way or another to industrial large- scale mining. Land conflicts between large mining companies and galamsey miners are becoming common. Closed-down undergroundmines or open pits are attractive targets for galamsey miners because mineral ore in mines that were or are operating are accessible with their artisanal equipments and technologies. Artisanal and small-scale mining treats old waste rock from a previously mined location that is no longer profitable for large-scale producers. When the large-scale mining activities had stagnated, the tension between large-scale companies and galamsey miners were relatively limited. With increasing gold price2' and government strategy to attract more foreign investment, however, these disputes have been on the rise. 18. With the sector's economic revival inrecent years, suspended operations have reopened and new concessions awarded on lands encroachedused by the galamsey. The government often ignores the artisanal miners' traditional rights to the land in favor o f large companies, to whom it grants legal entitlement; this action makes traditional miningillegal de facto. While the government receives royalties and income tax from large players, thousands o f galamsey, most o f whom rely on their mining for subsistence, are gradually forced to leave. Naturally, this negatively affects local communities as the 27The average gold prices (inUS.$)for last five years are: 309 (2002), 363 (2003), 409 (2004), 444 (2005), and over 650 (as o fMay 2006). - 70 - informal mining sector provides important economic sustenance to the local economy.28After Bogoda Gold took over a gold mine inDumasi in 1990, for example, the population of a village dropped from a peak of 6,000 to only 2,500, significantly underminingthe village's economic a~tivity.~' 19. Illegal miners often encroach on currently operating industrial mines. These "hit and run" activities are very common within most concessions operated by large-scale companies. Factors influencing the degree of such activities include accessibility to the mines and waste heap, and the degree o f the concession owner's policingactivities. Inmost cases, large-scale miningcompanies are reluctantto share the mine with the galamsey because the companies, as concession owners, will be liable for the environmental harm caused by galamsey activities. In some cases, galamsey miners came to a closed minethat was rehabilitated, and startedworking again. This not only harms the reclamationefforts by the companies, but also potentially exacerbatesthe environmental situation. 20. A few large mines have managed to establish rules for peaceful coexistence between the two groups. Gold Fields Ghana, for example, awarded certain areas of the concession land that are unsuitable for large-scale mining to galamsey workers who are local villagers, or to displaced workers from neighboring large-scale mines.The company purchasestheir product on site at a prevailing market price. Inmost cases, however, artisanal andsmall-scale minersare forced to move out fromthe concessionareas either by the companies' security forces, the police, or even the military. Policy, Legal, and Regulatory Issues A. MiningPolicy andLegislativeFramework 21. Ghana's long-term policy objective in the minerals sector has been guided by the need for establishing a legal and macroeconomic environment that would attract investments in new exploration and encourage the expansion of existing mines. This policy objective has led to the evolution of a supporting legislative and institutional framework that encompasses the Constitution, various laws, regulations, and instruments that provide guidance on how mining operations ought to be conducted. Recently passed, the Minerals and Mining Act o f 200630i s the primary law governing the sector. The legal framework draws a clear distinction between large-scale miningoperations and artisanal and small- scale mining (ASM) operation^.^^ In fact, the laws and regulations provide generous incentives and benefits for large-scale mining operations but have failed to create a similar incentive and benefit structure for ASM (See Box 4-3). Box 4-3: Regulationof ASM in Ghana InGhana, once apermit is issued, large-scale miners are authorized to sell or export minerals. Incontrast, ASM are entitled to sell only inaccordance with the rules and regulations prescribedby the Ministry.The case o f gold mining is instructive inthis regard. For example, buying agents travel to rural areas and purchase gold from both registered and galamsey miners at a near-market price. The fact that small-scale miners can sell their gold regardless o f their legal status helps reduce the amount o f gold being smuggled, but it has created a strong disincentive for A S M to register. Unless there are obvious benefits to becoming registered miners in the form o f technical or financial support from GoG, the majority o f ASM will not be persuaded to register, and this undermines the effectiveness of GoG's effort to regularize the informal A S M operations. 28 It is important to note that the informal mining sector brings both positive and negative impacts to local community. Negative impacts include increased crime rates andor spread o f HIV/AIDS, associated with an influx o f migratory artisanal miners and workers. *'Josh Harkinson, Confessions o f a Dangerous Mine, GristMagazine (June 24,2003). 30The Minerals andMiningAct, 2006,Act 703. 31This is a complex framework where, typically, multiple parties are involved. - 71 - B. MiningRights 22. Two types of procedures currently exist for granting and keeping mining rights. One procedure relates to ASM, and the second procedure pertains to other mining operations that are not considered as small scale. Bothprocedures require a license inorder to exercise a mineral right. 23. Although the law does not explicitly state which licenses are applicable to ASM, by virtue of the capital intensity involved with these licensees, they appearto exclude ASM. Of interest i s the fact that the license period varies considerably depending on the type of miningoperation. As shown inTable 4-1, the area applicable to licensing for mining activities has varied not only for ASM but also for large- and medium-scale operations (LMS).It must be noted, however, that the new law i s unclear on how much ASMare entitledto, leavingit inavery ambiguous manner. Table 4-1: Comparisonof Licenseswith ApplicableArea Size Grantee Type of license License period Size of area applicable to (years) license Large- Reconnaissance 1 N o more than 5,000 scalehledium-scale License contiguous blocksa minerlmining company ASM: Person, group None specifically 5 Inaccordance withblocks ofpersons, co- stated prescribedb operative society/ company Large- Prospecting License 3 N o more than 750 scale/medium-scale contiguous blocks Company Large- Mining lease 30 N o more than 300 scale/medium-scale contiguous blocks miner /mining company a. A block is definedas 21 hectares. b. It is important to note that the law is not clear onwho prescribes the blocks or how they are to beprescribed. Source: TheMinerals and Mining Act, 2006, Act 703 24. Gruntina Mining Rights In the case of large-scale miningoperations, an application for the grant o f amineralright mustprovide a statement specifying: 1, particulars ofthe financial as well as technical resourcesavailable to the applicant for the mineral operations, 2. an estimated amount of the operations' expenditure, 3, particulars of the proposed mineral operations, and 4. particulars of the applicant's proposal with respect to employing and training Ghanaians. 25. This application is submitted to the Minerals Commission. Within 90 days of receipt of the application, the Minerals Commission must submit its recommendations on the application to the minister . 26. In contrast, a license for small-scale mining is issued by the Minister for Mines or someone authorized by him.The license i s only to be issuedto Ghanaian nationals aged 18 years or older who are - 72 - registered by the District Office3' in the respective area. Application must be made in the manner prescribed by the minister and i s to be accompanied by a prescribed fee. The District Office then issues a certificate o fregistration. Once licensed, aperson i s authorized to "win, mine, andproduce mineralsby an effective and efficient method and shall observe good practices, health and safety rules and pay due regardto the protection of the environment duringmining operations." 27. Keeuina Mining Rights Licenses granted to both large-scale and small-scale miners are not transferable except with the minister's prior approval. In the case o f large-scale miners, this approval must be inwriting. By comparison, small-scale miners have no such requirement; however, this license may only be transferred to a Ghanaian citizen. 28. Inaddition, the holder of a mineral right is required to pay a prescribed annual ground rent as well as an annual mineral right fee. The Minerals Commission has indicated that this may affect the financial position o f state mining institutions as the annual payments may lead to lower earmarked revenues for these institutions. 29. Suspending or Canceling Mining Rights With regard to large-scale mining operations, the ministermay suspendor cancel amineralrightincircumstances where the holder ofthe right: 0 Fails to make payments on the due date requiredby the law, 0 Becomes insolvent, bankrupt, enters into any agreement or scheme of composition with his creditors, takes advantage of an enactment for the benefitof his debtors, or goes into liquidation, except as part of a scheme for an arrangement of amalgamation; 0 Makes a statement to the ministerinconnection with the mineralright that he knows or ought to have known i s false; or 0 For any reason becomes ineligible to apply for amineralrightunder the Minerals and Mining Act. 30. O f interest is the fact that the law does not specify breaches o f law as grounds for the suspension or cancellation o f miningrights. 31. Prior to suspending or canceling the mineral right, the minister gives notice to the mineral right holder as prescribed by law. The notice requires the holder to remedy the breach of the mineral right condition within a reasonable period. In circumstances where the breach cannot be remedied, the holder mustshow cause asto why the right shouldnotbe suspendedor canceled. 32. Incontrast, the license ofsmall-scale minersmayberevokedincircumstances where 0 The ministeris satisfied that the licenseehas contravened or failed to comply with any ofthe terms and conditions of the license or a requirement applicable to the licensee, 0 The licensee i s convicted of any offense relatingto the smuggling or illegal sale or dealing in minerals, or 0 The ministeris satisfied that it i s inthe public interest to do so. 33. Unlikethe case of large-scale miningoperations, norequirement exists to provide the small-scale miner with notice prior to the revocation of the miningright. Neither is there a stipulation that the mining rightholder receive the opportunity to remedy breachesofany of the conditions of the mineralright. 32 Section 90 (3) states: "A District Office shall among other functions a) compile a register o f all small-scale miners and prospective small-scale miners particulars that may be determined by the Minister; b) supervise and monitor the operation and activities o f the small-scale miners and prospective small-scale miners; c) advise and provide training facilities and assistance necessary for effective and efficient small-scale mining operations; d) submit to the Commission in a form and at intervals directed by the Commission, reports or other documents and information on small-scale miningactivities within the District and (e) facilitate the formation o f Small-scale Miners Associations" Source: GoG. TheMinerals and Mining Act, 2006, Act 703 - 73 - 34. Although the procedures for granting, keeping, and suspending or canceling mining rights are clearly stated in the laws, the issues o f weak enforcement o f mining sector laws as well as compliance with them continues to be a challenge. The time, labor, and costs associated with obtaining a license are often beyond what A S M workers can afford. A S M workers who rely on mining for daily subsistence are neither able to wait for their application to be assessed and approved nor able to pay for the required fee to obtain a license. Ensuring that all small-scale miners are licensed continues to be a major challenge, and addressing the inefficiency inthe licensingprocess for small-scale miningi s an important step inthis regard. The reason i s not only because o f the lack o f both human and financial capacity to ensure enforcement and compliance, but also because o fthe social problems associated with ASM. 35. To this end, a new mining policy i s being drafted, with technical assistance from the Commonwealth Secretariat. The drafting o f a new mining policy creates a timely opportunity for the government to revisit and address the issue o f creating a comprehensive and sustainable miningregime that mainstreams A S M activities and establishes a new and more effective approach toward land use, compensation, andreclamation. C. EnvironmentalRegulatoryFramework 36. The Environmental Assessment Regulations o f 1999 speak to the issue o f mining undertaking^.^^ The regulations state that an environmental impact assessment (EIA) i s mandatory for the mining and processing o f minerals in areas where the mining lease covers a total area o f more than 10 hectares. By virtue o f this, EIA i s not mandatory for A S M since the grantees mostly operate infewer than 10hectares. However, A S M are required to complete a form in lieu of the EIA procedure. In addition, EIA i s mandatory for quarrying and sand dredging. Mining undertakings involving metal and nonmetal mines mustbe registeredandissuedwith anenvironmental permit. 37. An applicant who requires an environmental permit must first make an application to the EPA and pay the prescribed fees. The Environmental Protection Agency i s then responsible for screening the application. Inso doing, it takes several factors into account: "(a) location, size and likely output o f the undertaking, (b) the technology intended to be used, (c) the concerns o f the general public, if any, and in particular the concerns of immediate residents if any, (d) land use, and (e) any other factors o f relevance to the particular undertaking to which the applicationrelates." 38. Once the application i s screened, the EPA issues a screening report on the application. The screening report specifies whether the application is approved or not or whether it i s necessary to submit a preliminary environment report or an environmental impact statement. In circumstances where a preliminary environmental assessment i s necessary, the EPA then requests that the applicant submit a preliminary environment report on the proposed undertaking. If the EPA i s satisfied that significant adverse environmental impact i s likely to result, the applicant i s required to submit an Environmental Impact Statement (EIS) regarding the undertaking. 39. A scoping report sets out the scope or extent o fthe environmental impact assessment to be carried out, and includes draft terms o f reference, which provide the essential issues to be addressed inthe EIS. An EIS for miningactivities must also have a reclamationplan. It i s mandatory that a reclamation bond34 33 The term undertaking is defined as "any enterprise, activity scheme o f development, construction, project, structure, building, work, investment, plan, program and any modification, extension, abandonment, demolition, rehabilitation or decommissioning o f such undertaking, the implementation o f which may have a significant impact." 34 The regulations state that a reclamation bond means ``performance bond, mining bond or rehabilitation bond or funds set aside in a reputable bank agreed upon by the Agency and the person responsible as a security deposit against default on reclamation or rehabilitation o f disturbed land arising out o f the undertaking." - 74 - based on the approved work be posted regarding the mining activity. An important gap inthe law i s that the regulations do not provide guidance onhow the amount of the reclamationbondshouldbe determined or what it should entail. Within 25 days of receiving the EIA, the EPA informs the applicant whether it i s acceptable or not. Once approved, the EPA registers the undertakingand issues an environmentalpermit. The applicant mustthen pay a fee, prescribedbythe EPA, for the environmentalpermit. 40. The person responsible for an undertaking for which an environmental impact statement or preliminary environmental report has been approved, i s responsible for submitting to the EPA an environmental management plan within 18 months of the commencement o f its operation and thereafter every three years. The Environmental Protection Agency i s to hold a public hearing on an application in circumstances where (a) there appears to be adverse public reaction to the commencement of the undertaking, (b) the undertaking will involve the dislocation, relocation, or resettlement o f communities, or (c) the EPA considers that the undertaking will have extensive and fameaching effect on the environment. Inso doing, the EPA appoints apanel madeup ofnot fewer than three persons and not more than five. At least one third o f the panel members must be residents from the geographical area of the intendedundertakingand shall reflect varying opinions, ifany, on the subject of the hearing. 41. Although Ghana has made important strides toward the development o f a comprehensive legal and regulatory framework governing the mining sector, many important legal factors continue to impede progress. For example, issues o f enforcement and compliance with mininglaws and regulations continue to be a major challenge. The EPA, which is tasked with the responsibility of monitoring undertakings relating to mining, has neither the financial nor human capacity to effectively monitor all undertakings. Other legal constraints include ambiguities inthe law that leave room for wide interpretations as well as omissions insome instances. D. MiningRoyalties 42. The 1987 Minerals (Royalties) Regulations guide the payment o f royalties regarding mining operations. Royalty payments are to be made quarterly and are based on the profitability of mining operations. The royalty rate ranges from a minimumo f 3 percent to a maximum o f 12 percent, but in reality, it has been fixed for the minimum3 percent inpast years regardless of the gold price, evidencing the strong bargaining power of large mining companies. It is noteworthy that the royalty formula i s negotiated and fixed for the lifetime of the mining lease between the mining company and the g~vernment,~~ limitinggovernment's ability to capture a greater share o f economic rent when prices thus increase, or reducing the tax burden on miningoperations when prices are falling. The new Minerals and MiningBill, which was approved inMarch2006, fixes theroyalty rate ceilingat 6 percentbaseduponthe estimated operating profit margin calculated for a mineprior to startingproduction. According to the mining authorities interviewed, under the new law a legal instrument will be needed to regulate the sliding scale of royalties. The authorities suggest linking the royalty rates to international metal prices within the range o f 3 to 6 percent to be established by law. The rates increase when metal prices rise, and vice versa. Figure4-2 below compares the revenues from both a fixed and flexible royalty regime for gold. The blue line indicates the trajectory of revenues from Ghanaian gold production applying the existing fixed royalty o f 3 percent of gross value; the pink line i s the hypothetical trajectory o f revenues applying the Bolivian gold royalty, which varies inthe range o f 4 to 7 percent of gross value v i s - h i s the internationalgoldprice.36Revenues are those for the period 1993-2004. 35 For fbrther reference, see Minerals (Royalties) Regulations, 1986. 36 The Bolivian royalty has a floor level o f 4percent and a ceiling level o f 7percent. Between the floor and ceiling levels, the royalty rates vary inpercentage according to the following relationship: 0.01*GQ (gold quotation). - 75 - Figure4-2: Comparisonof Fixedand FlexibleRoyalties Millions ofcedis 350,000 300,000 250,000 200,000 fixed royalties (3 percent) flexible 150,000 I J 100,000 50,000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: GhanaMinerals Commission 43. As can be seen in Figure 4-2, part of the difference in the royalties is explained by the higher floor rate in Bolivia (4 percent) than in Ghana (3 percent); see, for example, the period 1996-2000. Yet there i s an increasing difference in the revenues accruing to the government in favor of the Bolivian system when the gold prices rises above US$400 oz-troy, as happened in the period 2003-2004. At the current prices, above US$600, this difference would be even much larger, more than twice the revenues collected through the Ghanaian royalty system. It i s important to note that the flexibility of the system is crucial for sustaining international competitiveness inthe royalty system. While a spike inprices results ingreater profits as production costs are largely fixedifgold prices drop, the windfall profits disappear and competitiveness i s preserved as the royalty rate decreases accordingly. Inthe current metals market situation, the GoG has an opportunity to increase its revenues from mining. Ifa flexible royalty system is introduced, Ghana's international competitiveness to attract investment in the mining sector will not be compromised. InstitutionalAnalysis 44. Sustainable development of the mining sector offers opportunities for economic growth and poverty reduction in an environmentally and socially responsible manner. The absence of effective institutional arrangements, however, can result in mining growth having significant negative environmental impacts, aggravating existing levels of poverty, and depriving future generations of the option to sustainably utilize mineralsresources. 45. The main institutions inthe sector, analyzed with respect to their impact onminingpolicy and its enforcement, are summarized below; a discussion follows on their implications for environmental management . - 76 - Table4-2: Summaryof KeyMining-relatedInstitutions Agency Impacton Policy Notes Execution 1.CentralGovernmentMinistries.DeDartments& Agencies - Parliament Select Committee is well informed, engaged in debate on new Mining Bill. However, the fact that some MPs sit on board o f mining companies i s challenged by civil society for its potential conflict o f interest. MinistryofFinance Involved, because o f revenue concerns; recently established a Economy and Planning gold assay facility to monitor underreporting o f gold carats. Internal Revenue Service Collects all mining royalties revenue (with Bank o f Ghana). Minerals Commission Prepares mining licenses; sells data and information to mining companies; acts as one-stop shop for investors; monitors concession areas allocated. Responsible for registering small- scale miners, but lacks capacity to fulfill that function. Ministryof Lands, Lead ministry for mining policy. Minister grants mining Forestry andMining licenses. Mines Department Involved in the health and safety aspect o f mining and also plays an active role indecommissioning. Geological Survey Develops primary information on geological resources and Department produces the geological map o f Ghana. Customs & Excise Collect export taxes o f minerals and imports o f mining Preventative Services inputdmachinery. Representatives from CEPS are attached to every miningcompany. Former Ministry o f Relatively little involvement in the sector, underresourced Environment ministry with limitedinfluence inCabinet. Environmental Protection Formally issues environmental permits but underresourced, Agency hence weak regulatory role in the mining sector. Inability to enforce mining environmental regulations, effectively follow uponreclamationbonds, etc. Office o f Stool Lands Allocates revenues from mining to Stools (chiefs) MinistryofTrade and Encourages ForeignDirect Investments (FDI). Industry Forestry Commission Regulatory agency for GoG forest & wildlife policy. Forestry Commission issues mining companies with forest entry permit for mining inforest reserves. 2. Localand CustomaryGovernment National House o f Chiefs 0 Critic o f management fees retained by the Minerals Commission. Customary land management holds 85percent o f land inGhana, but this excludes rightsto minerals. Stools Hold land incustody for people; recipients o f mining revenues from royalties. Important in negotiation o f compensation for crops and landdamaged. Municipalities 0 Important where mining operations are adjacent to towns. They lack funds and are critical o f regulations on compensation; .... District Environmental Committees are poorly resourced and ..... ineffective. District Assemblies 0. Recipients o f mining revenues from the Office o f Stool Lands but otherwise generally passive. Lead economic development inmining towns. 3. PrivateSector Chamber o f Mines Represent large- and medium-scale miners. Large-Scale Miners Responsible for 80percent o f industry's output. Criticized, but now showing a higher level o f commitment to environmental and social responsibility. Some provide staff and technical I I - 77 - assistanceto small-scale mining. Medium-scale Miners 0. Small concession areas o f 25 ha; modest investment in equipment. Artisanal and Small-scale 0 0 Represent 20percent o f output, but activities, although Miners/ Illegal/Galamsey environmentally damaging, contribute much to income Operators generation, livelihoods, and employment in the rural areas. Profound impact/ unsustainable mining. Social conflicts over access to mining areas. Local Traders 0.0 Purchase gold from A S M miners, sell to Precious Minerals Marketing Corporation 4. Civil Society-Policy Think Tanks & AcademicInstitutions University o f Legon/ 0. A few individuals with strong interest inmining andpolicy. ISSER Western University 0. Technical training for the industry. College (Tarkwa School o f Mines) 5. Civil Society-NGOs, CSOs, CBOs Wassa Association of 0.0 Main coalition on mining advocacy and community rights. It Communities Affected by has ensured high profile inthe media on mining issues, as well Mining (WACAM) as making presentations at shareholder meetings in North America o f some fmoperating inGhana. Centre for Public Interest 0.0 Undertakes litigation on issues o f public interest. At present Litigation (CEPIL) there are court cases against Anglo-Gold Ashanti, Bogoso Gold, Newmont, Prestea Gold, and against the Government o f Ghana (EPA) claiming failure to effectively regulate and enforce compliance on environmental matters. ThirdWorldNetwork 0. Has a general policy campaign seeking more equity, (TWN) participation, ingovernment miningpolicy. Internationally-affiliated Active in local services, channeling advocacy work through NGOs (FOE,CARE, WACAM. FIAN) National NGOs 0 Diverse andvaried interest inmining issues. Community-based 0 Locally important, but too few, too weak. Organizations TraheUnions 0 Concerned with mine safety. Key: 0 Marginal 00 Low 000 Moderate 0000 Significant 00000 Highly significant 46. The GoG has accorded high priority to sustainable development o f the mineral policy with specific focus on A S M in its poverty reduction strategy. As analyzed in the section below, "Funding o f the Mining Sector," weak human and technical capacity and the lack o f funds often prevent government agencies in the sector from fully executing their mandates. Constrained by limited capacity and funding, existing mininginstitutions inGhana tend to focus on supporting industrial-scale operations because they are a large source o f government income. Technical maps and geological information created by the Geological Survey Department (GSD), for example, are commonly used by investors. However, the department has not been successful in either identifying areas for A S M activities or disseminating such information to A S M operators; their daily subsistence could be significantly improved by appropriate geological datan3'The Mines Department has had similar financial constraints and has failed to provide sufficient support to A S M insafety and health issues. 37Under the umbrella o f the Mining Sector Support Program, the GSD i s carrying out geological mapping inregions with geological potential and is seeking areas that would be adequate for ASM. At the time this report was written, none o f these areas hadbeen demarcated for A S M activities. - 78 - 47. The Minerals Commission, in charge of the regulation and utilization of the mineral resources and the coordination o f related policies, has been better funded than other similar agencies. But in practice, its principal role has been to foster the development o f mineral resources by attracting foreign investors and negotiating leases with them. The commission also has the responsibility of promoting the formalization o f ASM. Its increased workload i s partly the result o f weakness in other agencies, and has introducedconsiderable constraints to its capacity to support ASM workers. 48. In addition, the Commission does not consider environmental or social aspects of regulation within its mandate. Its regulatory role effectively ends once licenses are issued. Key policy decisions, such as opening up new forest reserves for gold mining, are taken at cabinet level. This leaves enforcement and monitoring of environmental regulations mainly in the hands o f the Environmental Protection Agency (EPA). In practice, however, the EPA i s illequipped to undertake its regulatory functions (see discussion below, "Funding of the Mining Sector"). Sound coordination between the Minerals Commissions and EPA is crucial to ensure that environmental and social issues are integrated into the process o f granting mininglicenses. Inreality, however, the Minerals Commission cites the EPA as the major source o f delay in the process of granting mining exploration and exploitation licenses. The EPA does not-in practicdemand that reclamationbonds be postedprior to operations commencingin the field, and has been ineffective inpursuingdefectors. For example, in the case of Bonte Gold Mines Ltdwhichwas liquidatedin2004, the EPA failedto collect the reclamationbondofUS$2.6 million. 49. Also, monitoring of environmental performance is weak because of the EPA's limited financial and humanresources. Box 4-4: Demandfor Improved Compliance In 2005, the Center for Public Interest Law (CEPIL) and the Center for Environmental Law, two Accra-based NGOs, sued Bonte Gold Mines Ltd. for alleged negligence of regulations and destruction of the environment. The company closedwithout reclaiming the environment. Negative environmental impacts not only impede revegetation, but also prevent the local communities from using the area for fanning. The company lefl behinda debt o f USD$18 million, including a US$2.6 million reclamation bond. The Minerals Commissions and EPA have also been sued for their failure to execute statutory responsibility. The plaintiff claimed that state agencies failed to ensure compliance when the company reneged on its duty to restore the environment. Source: Runaway Mining Firm Dragged to Court, Public Agenda (April 8,2005). 50. Improved "Corporate Social Responsibility" trends within the sector have arisen out of pressures from civil society and NGOs, rather than from the compliance efforts that the EPA has been able to exert (see 5). Violence in the sector i s not unknown; for example, reports persist of security agents shooting people who trespass in mining areas. A number of civil society organizations are advocating improved environmental governance, social protection, compensation for affected communities, and human rights in miningregions in Ghana. There is also a National Coalition of NGOs on Mining; and three of its members are particularly active: WACAM, CEPIL, and TWN. - 79 - Box 4-5: Corporate SocialResponsibilityinthe Mining Sector Over the past years, mining companies have applied portions o f their profits to support national or local projects. This so-called "corporate social responsibility" constitutes an expression of intent; no explicit legal requirements exist for mining companies to provide services to local communities. Indications are that in the major extraction sites, mining companies account for a significant share o f the social infrastructure and provision o f social services. These typically involve Alternative Livelihood Projects, educational and health care services, infrastructure and utilities, and the sponsoring o f recreation and sports activities. Another example o f the benefits provided by mining companies is their cross-subsidizing small users' electricity consumption as a result o f the tariff structure that favors large consumers. During a 2004 conference on Corporate Social Responsibility in Ghana, the Chamber o f Mines stressed the significant fiscal contributions by the mining companies at the local level. The implementation o f the Extractive Industries Transparency Initiative-EITI (for a more detailed discussion, section 4.4 D below) will clarify the level o f contribution the companies provide. The Chamber o fMines, avoluntary association o fpublic andprivate sector actors o fthe mining industry,promotes corporate social responsibility andhuman resource development within the industry, and is supporting the Extractive IndustriesTransparency Initiative (EITI).However, member companies often compete with ASM for limitedmining areas, andtheir strong bargaining power, plus the government's desire to attract foreign investment, often result in marginalizationo f ASM. Source Minerals Commission and Chamber of Mines. Proceedings of National Mining Conference on Corporate Social Responsibility in Ghana, 2004. 51. Recognizing that institutions in the mining sector need to be strengthened, the European Community and GoG are carrying out a MiningSector Support Programto help mininginstitutions fulfill their mandate. This program's aims are: institutional reinforcement and capacity building; provision o f geo-scientific data; mining environment protection, including the development of an alternative use of mercury by small-scale miners; and mining infrastructure upgrading in the Western region. One of its projects, the National EIA & SEA Project, will carry out environmental audits of 61 major mining sites, and also consider health and social issues. This information will feed into a strategic environmental assessment that will cover major river basins affected by mining, and communities in a wider area. The results of the project are expected to provide valuable information for environmental management and institutional strengtheninginthe miningsector. FiscalAnalysis of the MiningSector A. Mining Sector's Contribution to Government Revenue 52. In Ghana, the mining sector is important because of the large amount of fiscal revenue it generates. However, the sector does not generate substantial employment. In 2004, the government's revenue from the miningsector was 450.4 billion cedis (around US$50 million), accounting for 9 percent of total government tax revenues (see Table 4-3 below).38 38 This is equivalent to 6.6 million cedis (about US$ 732) per worker employed in the sector. This ratio is substantially higher compared with the ratio for total fiscal revenues related to all workers employed in all sectors, 0.5 million cedis, or about US$ 55 (see Appendix 3, Table A3-2). - 80 - Table 4-3: Central Government RevenueSourcesby Sector, 2001-2004 (in million of US%) 2001 2002 2003 2004 Sector source Revenue Share of Revenue Share Revenue Share of Revenue Share total of total total of total (in (in (in (in percent) percent) percent) percent) Banking 45.55 20.9 57.63 19.8 70.24 16.5 92.2 16.7 insurance & finance Agriculture 2.34 1.1 2.76 0.9 2.63 0.6 3.22 0.6 Timber 3.01 1.4 5.45 1.9 4.50 1.1 5.17 0.9 Mining 25.52 11.7 30.87 10.6 45.49 10.7 49.96 9.0 Manufacturing 24.35 11.1 38.78 13.3 45.58 10.7 61.86 11.2 Commerce 15.70 7.2 21.77 7.5 28.83 6.8 45.80 8.3 Public Services 17.19 7.9 18.84 6.5 41.69 9.8 69.42 12.5 Miscellaneous 47.11 21.6 67.15 23.1 119.55 28.1 142.01 25.7 Othera 37.64 17.2 47.74 16.4 67.48 15.8 83.64 15.1 Total 218.40 100.0 290.98 100.0 425.97 100.0 553.26 100.0 Memo Mining sector revenues Nominal growth 20.9 47.4 9.8 rate (inpercent) a. Includes: VALCO, Petroleum, Real Estate, Construction, Transport, Printing, and Professional Services. The revenue contribution o f each sector is as follows: 0.2 percent for VALCO, 1.9 percent for petroleum, 1.1 percent for real estate, 4.8 percent for construction, 1.5 percent for transport, 0.7 percent for printing, and 2.7 percent for professional services in2004. Note: Total tax collection includes: Royalties, corporate tax, stamp duty, capital gains tax, PAYE, gift tax, penalties, dividendtax, rent tax, commission, interest, banderols, management and technical services and registration fees, and miscellaneous, but excludes reconstruction levy. Source: RAGB. 53. Comuosition ofrevenues. The revenues from the mining sector consist of royalties, corporate tax, Pay As You Earn (PAYE) income tax, and a reconstruction levy. As shown inTable 4-4 below, the bulk of revenues stems mainly from mineral royalties (43 percent of total sector revenues in2004) and income tax of local employee, PAYE (about 27 percent in 2004). The importance of mineral royalties is also reflected inits share of total government royalties (including timber, mineral, and copyright royalties), on average, 99 percent over the years 1999-2004.39Corporate income tax i s relatively low-most companies do not pay income taxes because of the virtual tax holiday enjoyed from generous capital allowances. Accordingly, in comparison to the gross production value of minerals, the total taxes mining companies pay inGhana are a small amount (see Figure4-3 below).40 39See Appendix 3, Table A3-3. 40A miner receives as income the grossproduction value (GPV) less the expenses incurred for smelting andrefining the product. While in some cases these expenses could be large, in gold they are very small--from 1 to 3percent o f the GPV. - 81 - Table 4-4: Mining Sector by Sourcesof Revenues, 2000-2004 (in millions of US%and percent) Year Corporate Tax Mineral PAYE Reconstruction Totala Royalties Levy (in percent (in percent (in percent (in percent (in percent millions millions millions millions millions of US$) ofUS$) of US$) ofUS$) ofUS$) 2000 1.75 8.1 13.17 61.3 6.57 30.6 193.8 21.50 2001 2.75 10.7 14.13 54.8 8.44 32.7 0.48 1.8 232.5 25.79 2002 2.61 7.7 17.03 50.3 11.26 33.3 2.94 8.7 304.9 33.82 2003 7.55 16.2 21.56 46.2 15.64 33.6 1.86 4.0 420.4 46.63 2004 11.13 19.9 23.93 42.8 14.91 26.7 5.90 10.6 503.6 55.86 a. Excluding miscellaneous. Note: Reconstructionlevy i s 2.5 percent o f gross profit before tax for 2000-2005, 15percent on gross profit after bad & doubtful debts for financial institutions. Source: Minerals Commission. Figure 4-3: Comparison of GrossProduction Value and Government Revenuein 2003 rPGold W Diamonds OBauxite 0Manganese W Royalties E l CorporateTax W PAYE 0ReconstructionLevy Source: GhanaMinerals Commission 54. Collection arrangements The Internal Revenue Service i s responsible for the collection o f most of the revenues in the sector (royalties, corporate tax, PAYE, stamp duty, capital gains tax, rent tax, and gift tax). Property taxes are paiddirectly to the District A~semblies.~~Payments o f the annual groundrent are made to the owner of the land or, in the case o f the stool land, to the Office of the Administrator of Stool Lands (OASL)?* The MC only collects fees directly related to its services from the mining 41 In 1988 Ghana introduced the District Assembly system. There are 110 District Assemblies, 3 of which are Metropolitan Assemblies having a four-tier structure (Regional District, Local Council, and Towns and Village Development committees); three o f these are Municipal Assemblies, which have a three-tier structure (World Bank, DecentralizationPolicies and Practices-Case study Ghana, 2003d). 42The OASL is responsible for collecting revenues due on stool lands as well as for transferring revenues to the local authorities (District Assemblies, stools and traditional authorities). - 82 - companies (e.g., processing fees, exemption fees, etc.). Since artisanal and small-scale miners are exempt from taxes, tax collection inthe miningsector i s limitedto medium- and large-scale miningcompanies. B. DistributionofMiningRevenuesandLocalBenefitSharing , 55. At the central level. The generation of revenue through the exploitation of mineral resources raises the important distributional issue o f how revenues are reinvested in the mining sector and shared with the mining communities. Since 1993, 20 percent of total mineral royalties were earmarked for the Mineral Development Fund (MDF), and the remaining 80 percent disbursed in the government's consolidated fund (see Figure 4-4 below). This indicates that Ghana's minerals policy focuses on extracting mining revenues mainly at the benefit o f the central g~vernment.~~ Out o f the 20 percent of total mineral royalties, 10 percent has beenreserved for the MDF supporting the public miningagencies, and 10 percent was transferred to the OASL. Following Ghana's budgetary crisis in1998, however, the Ministry of Finance and Economic Planning (MoFEP) has retained the 10 percent for the MDF (World Bank, 2003~). Figure 4-4: DistributionofMineral Royalties (percent share) authorities 4.95 (55 percent) 2.25 (25 percent) 1.8 (20 percent) ?? -!1, .!:T -1, .!?? -1, MiningCommunities 43The MDF was initially set up to support the three mining agencies and to fund environmental rehabilitation and development projects for mining communities. It was created in 1993 by a Cabinet decision, not by an Act of Parliament. - 83 - 56. At the local level. According to a distribution formula enshrined in Ghana's constitution, out of the 10 percent o f total royalties channeled to the OASL, the office retains 10percent, while the remaining 90 percent is distributed to the local authorities inthe following proportions: (a) the stools of the mining areas receive 25 percent, (b) the traditional authorities of the areas obtain 20 percent, and (c) the District Assemblies with the area o f authority inwhich the stool lands are situated received 55 percent (see Figure 4-4 above).44Revenues for the local authorities have increased over the observed period 1999-2003, and only slightly dropped in 2004 by -15 percent (see Table 4-5 below). If compared with the distribution formula o f 9 percent earmarked for the local authorities, inpractice, the actual share disbursed i s erratic and seems to be ad hoc, depending on circumstances in each year. This provides poor predictability of resources for the miningcommunities. Table4-5: Distributionof Earmarked MineralRoyalties(in millions of US%),1999-2004 Amount Amount allocated to the local level Amount local distributed to the authorities/total OASL mineral royalties Total OASL Total District Stools Traditional Assemblies Councils 1999 0.06 0 0.04 0.02 0.01 0.01 2000 1.32 0.13 1.19 0.65 0.30 0.23 1.o 2001 0 0 0 0 0 0 2002 1.40 0.14 1.25 0.69 0.31 0.26 0.82 2003 3.42 0.34 3.07 1.69 0.77 0.61 1.59 2004 2.92 0.29 2.62 1.44 0.65 0.52 1.22 Source:Minerals Commission. In 2001, royalties were not allocated to the OASL and local authorities because of elections and changes in government. Government, however, allocatedpart of the 2001 royalties in2002 and 2003. 57. Shortcorninas. Based on the government's intention to use the MDF as a mechanism both to finance the agencies in the mining sector and to transfer a share of the royalties back to the mining communities, we see that revenues are reinvested inthe mining sector either to a limited degree or not at all. As seen above, only a small share o f the royalties reaches the mining communities, which are the most affected by the mining activities (see "Overview and Diagnosis" section). Not only i s the overall level of revenue low, but the distribution mechanism is inefficient and biased against the local mining communities. Some shortcomings o f this distribution mechanism include: Delayed payments to the three local authorities (District Assemblies, traditional authorities, and stools), becauseof the disbursement procedure through the OASL; Misuse of these payments by localauthorities financing expenditures other than those that benefitthe localminingcommunities; and Lack o fproper accounting for andreporting o f the use of these resources. 44See Article 267 of Ghana's Constitution (Republic of Ghana, Constitution ofthe Republic of Ghana, 1992). - 84 - 58. On the whole, the royalties actually reaching the mining communities represent only a small fraction of the mining rent. Yet royalties are the main source o f revenue for communities to restore the environment and to reinvest inland and other assets for economic growth and poverty alleviation. 59. Meanwhile, mining agencies have been underfunded. Resources are not being released to the MDF, which thus impacts the regulation and safeguarding function of the agencies (see section on "Fundingofthe MiningSector"). 60. Adeauacy of benefits. Against the benefits provided by the mining companies (employment, improved social services, etc.; see 5), one must recognize that there are also costs such as (a) the environmental legacy o fpast miningoperations, (b) inadequateprovision o f funds postclosure, and (c) the resettlement o f communities, which results in unemployment, alteration o f livelihood, changes in housing, and so forth. Present evidence indicates that the government still struggles with the environmental liabilities o f past miningoperations for which it failed to hold the companies accountable. The problem of inadequate funds available to cover rehabilitation costs at the closure of each mining operation continues to this day. Last, negotiations and compensation payments have not always been transparent, and the level ofpayments has been considered low and inadeq~ate.~~The World Bank Project Performance Assessment of the Mining Sector Development and Environment Project had addressed these issues. It recommended the need for a broader cost-benefit analysis of large-scale mining that factors in social and environmental costs and includes systematic consultation with the affected communities (World Bank, 2 0 0 3 ~ ) . ~ ~ 61. The government has also failed to ensure that miningcommunities affected by extensive resource extractionbenefit by receiving sufficient funds. The tangible economic benefits of resource extraction are often not felt by mining communities themselves. An urgent need exists to make the mechanism for transferring resources back to the mining communities more effective, transparent, and equitable. Some companies have decided to establish a specific "Development Trust Fund" for mining areas to respond directly to community development problems, as well as to address development issues emerging after the gold deposits have been mined. The proposed New Mining Law intends to give the MDF more transparency and accountability and increase its resources by establishing mandatory contributions for community development from miningcompanies.47 C. Fundingo fthe Mining Sector 62. Funding of the ministry through 2004.48The budget of the mining sector i s not significant. Budgetary allocations to the Ministry of Mines amounted to 20.3 billion cedis (US$2.2 million) or 0.1 percent of the total budget envelope in 2004.49 This small budget i s determined largely by donor assistance, which has fluctuated over the observed period; this suggests the sector faces difficulty in predicting its future funding levels.50Whereas over the period 2002-2003 the sector has been mainly financed by borrowing, this changed to grant financing in 2004 with the implementation of the mining sector support program, financed by the European Union (see Appendix 4, Figure A4-2). Overall, the 45NationalCoalitiononMining, Memorandumonthe Minerals andMiningBill2005. 46for further reference, see also ColinNov Boocock, EnvironmentalImpacts of Foreign Direct Investment in the Mining SectorinSub-SaharanAfrica, 2002. 47Inorder to respondto some concerns raisedby the mining communities, NGOs, and civil society regardingthe limited benefits emanating from the mining activities, the MC, in collaboration with the Chamber of Mines, organized a conference on the theme: "Corporate Social Responsibility in Ghana: Extending the Frontiers of SustainableDevelopment" in2004. 48An assessment of the mining sector budget is difficult as the sector was managedby the Ministryof Mines only until 2004 and was mergedthen with the Ministry of Lands andForestry. Prior to 2002, the sector was managedby the Ministry o f Mines andEnergy. 49See Appendix 3, Table A3-4. 50See Appendix 3, FiguresA3-1, A3-2, andTable A3-5. - 85 - significant donor assistance for the sector's institutional strengthening and investment needs raises concerns about the sustainability o fresources for the sector once the EUprogram i s phased out. 63. The mining agencies in 2005. Following the 2005 merger o f the Ministry o f Mines and the Ministryof Lands and Forestry, the three key miningdepartments, the Minerals Commission, the Mines Department and the Geological Survey Department, were transferred to the MoLFM. Overall budgetary allocations to the three miningagencies accounted for 33.2 billion cedis (around US$3.6 million) in 2005, or 8 percent o f the total M o L F Mbudget.51Out o f this US$3.6 million, the Geological Survey Department (GSD) receivedthe largest share (55percent), followed by the MC (33 percent) and the Mines Department (6percent) (see Figure 4-5).52 Figure 4-5: Composition of the Allocated Budget by Agency in 200 (as ashare of total miningsector budget) Administration Minerals Mines Geological Commission Department SUMy Department Source: GOG,Appropriation Act, 2005. Figure4-6: Mining sector: Composition of theAllocatedBudgetby Agency and by Sources in 2005 (as ashare of total miningsector budget) Admin MC Mines GSD Total mining Department budget IGOGIIGF 0Donor 51See Appendix 3, TableA3-6. 52See also Appendix 3, TableA3-7. - 86 - Source: GoGAppropriationAct 2005. 64. As illustrated in Figure 4-6, the high level o f budgetary allocations to the GSD mainly relate to significant donor assistance. In fact, the GSD was the only beneficiary o f donor assistance in 2005; GSD's budget accounts for nearly 40 percent o f the total mining sector budget. Incontrast with the other agencies, the MC i s funded out o f its internally generated funds, which derive from application fees, publications, public services, and so forth. However, its financial autonomy i s at present not sustainable (see Figure 4-7 below). The level o f income i s not high enough to cover the annual expenditure^.'^ Resources taken from a reserve established inthe 1990shave financed the deficit. The MC estimates that inthe next three years the stock of reserves will be diminished; it is inthe process of exploring further areas o f revenue increases (e.g., the revision of fees and licenses) to avoid dependency on government's budget inthe next years. Figure4-7: Comparisonof MC's Incomeand Expenditures(in billionsof cedis) Income I Expenditure Income I Expenditures 2004 2005 65. Shortcomings. Since 1998, the MoFEP has not releasedresources to the MDF, which undermines the operational capabilities o f the mining agencies. This has been particularly detrimental for the operation o f the Mines Department and the GSD whose investment budget was topped up by the MDF in the past. The cuts in the investment budget have constrained the Mines Department from monitoring the implementation o f health and safety regulations at the mining sites. Inaddition, the department i s short o f technical staff. Likewise, the GSD has found its financial situation worsening as funding from the MDF was cut and the Bank`s MSDEP closed in 2001.54Inthe context o f the MSDEP, the restructuring o f the GSD was discussed because the department faces severe inefficiencies from overstaffing at the lower skill levels; scope for subcontracting exists, but the government has not pursued it further.55Although the MC has sought financial autonomy, the present funding arrangement i s not sustainable. Moreover, given the constraints in revenues, the MC has been operating under a tight budget and has not been able to 53See also Appendix 3, Table A3-8 andA3-9. 54One of the stated objectives of the MSDEP was to enhance the capacity of the mining sector institutions so that they could carry out their functions of encouraging and regulating investments in the mining sector in an environmentally sound manner (World Bank MSDEP SAR 1995). 55A diagnostic study of the GDS highlighted that it needed radical restructuring and that much of its technical work should be subcontracted to specialized, outside fm.The GSK never accepted the restructuring proposals (World Bank 2003~). - 87 - adequately execute all plannedprograms.56The three mining institutions will benefit over the next years from an institutional reinforcement and capacity building program funded under the EU Mining Sector Support Program. 66. Fundina ofthe EPA. As mentionedinthe institutional analysis, the EPA i s strugglingto fulfill its regulatory and enforcement function. The agency's poor performance i s mainly attributed to its underfunding.In2005, the agency received 9 percent (14 billioncedis, or US$1.5 million) oftotal former MinistryofEnvironment and Science(MES) b~dget.~' Also in2005, the MES obtained 0.8 percent o f the total nationalbudget (around 157 billion cedis, or US$17.2 million).58The EPA budget i s financed partly from the consolidated fund and partly from its internally generated funds (IGFs), which accounted for 51 percent of the total budget in 2005 (see Figure4-8 below)." Around two thirds o f the IGFs support the National Environment Fund (NEF), while 25 percent is retainedby the EPA for administrative purposes. It is noteworthy that the EPA financing is basedon atwo-budget system(the consolidated budget andthe resourcesprovided by the NEF for the operation of the agency). Untiltoday, the agency has not yet made efforts to consolidate its fragmented budget and to make the funding of the NEFmore transparent. Figure4-8: Compositionof AllocatedEPA Budgetin2004 and 2005 (in billionsof cedis) I I CF IGF Total budget Note: Donor assistance is not included in EPA's budget. The agencyhas benefitedby donor assistance (mainly coveringits needs for investment andpartially servicedexpenditures)over the past years. The funds are directly requestedfrom the developmentpartner but are not document inthe EPA budget. Source: EPA (2004 annual report) and GoG (Appropriation Act 2005)). 67. Sustainabilitv. The NEF was set up to create a reserve that would allow the EPA to become sustainable in the long-term.60The EPA can apply to the board of the NEF for funds to finance selected activities such as environmental education, research, human resource development, and others. Because o f insufficient funds from the consolidated fund over the past years, the agency has not been able to 56 According to the MC 2003 annual report, the commission was not able to implement several programs, for example, the restoration o f old geological reports and maps as well as the Alternative Livelihood program, because o f insufficient resources in2003. 57 See Appendix 3, Table A3-10. 58GoG, Act o fthe Parliament o fthe Republic o fGhana, entitled the Appropriation Act, 2005. 59 The agency generates revenues (mainly fees and charges) from the following sources: chemical clearance, meat fishclearance, EIApermitting, miningexploration, small-scale miningpermitting, and tree cuttingpermitting. 6o The National Environment Fund was established under Part 111, Section 16(1) o f the Environmental Protection Agency Act, 1994, Act 490. - 88 - increase its reserves as planned.61As shown inTable 4-6 below, the budget execution rate of the agency's CF budget in 2003 and 2004 was less than 85 percent, the result of a limitedrelease of resources by the MoFEP during the fiscal year. The deficit had been financed by the internally generated revenues that were foreseen for the reserve. Table 4-6: The ConsolidatedFundof the EPA in2003 and2004 2003 2004 Allocated Released Budget Allocated Released Budget budget budget execution budget Budget execution (inmillions (inmillions rate ( (inmillions (inmillions rate of US$) of US%) percent) of US$) O f U S ) percent) Total 0.82 0.69 83.5 0.80 0.68 84.7 PE 0.58 0.47 80.4 0.52 0.49 93.1 Admin 0.12 0.11 90.3 0.13 0.08 60.9 Service 0.11 0.10 92.4 0.11 0.10 92.6 Investment 0.02 0.01 80.5 0.02 0.00 0.0 Source: EPA data. 68. Performance. The weak finding position of the EPA has severely impacted its capacity to function effectively and efficiently in the mining sector. The mining unit at the EPA employs only four employees in charge o f regulating and monitoring the mining sector. Aside from insufficient agency funds for recruiting more staff, the low contractual status of its staff, including lower salaries and inadequate benefit payments, provides little incentive for new employees compared with civil servants at other public agencies and ministries.62Expenditures that fall under administration and services have been also inadequate; as a result, the EPA i s limited in its ability to travel, to set up local offices, and to purchase equipment, material, and vehicles. D. FiscalTransparencyandAccountability 69. Although the IRS has a high royalty collection rate, mining company reporting on royalties has come into question. Likewise, concerns have beenraised regarding the accuracy of the reportedretention rate o f foreign exchange.63The Bank o f Ghana and the MC are responsible for monitoring the foreign exchange outflows and inflows, including the repatriation o f retained export proceeds into domestic commercial banks and the partial settlements of billswith local contractors inforeign currency. However, no independent institution exists to verify the information provided by the mining companies (e.g., regardingexchange earnings, off-shore retention, and voluntary repatriation) (IMF, 2004). 70. The 2006 gold audit conducted by the Ministry o f Finance for the first time indicates the government's commitment to improve transparency inrevenue collection. The purpose o f the audit was to At present, the reserves amount to about 8 billion cedis (about US$ 800,000) in 2006, up from 2 billion cedis (US$ 221,000) in2002. However, EPA estimates that, if more secured funding had come to the CF inthe past, its reserve would have morethan 15 billion cedis (US$ 1.7million) in2006. 62Over the past years, the agency has beencarrying vacant positions, lacking the resourcesby MOFEP to fill them. In2005, the agency was able to fill 27 vacant positions (out of 30); however, only 15 remainedoccupiedat the end ofthe year. 63GhanaearnedUS$840million inforeign exchange from goldminingin2004 (International Monetary Fund. 2005. Ghana: 2005 Article IV Consultation, Third Review Under the Poverty Reduction and Growth Facility, and Request for Waiver ofNonobservanceofPerformanceCriteria and Extension ofthe Arrangement-Staff Report.). - 89 - determine whether the mining companies are making a total accounting o f gold produced in terms o f quantity and quality. 71. Moreover, the Government of Ghana has signed the EITI, in which governments and industry each agree to report on transfers and receipts using standard reporting tern plate^.^^The initiative has the support of the Chamber of Mines; it recognizes that EITI participation will not only improve the industry's public image, but also increase corporate governance standards and encourage more mining companies to list on the Ghana Stock Exchange. Unfortunately, progress with EITI has been relatively Limitedtesting of revisedtemplates has taken place inTarkwa, and the audit-like contract for the "Independent Aggregator"-a key component of EITIprocesses-was only advertised inJanuary 2006. Box4-6: BenefitsofImplementingEITI The primary beneficiaries of EITI are the governments and citizens of resource-rich countries. Some of the key advantages o f improved transparency inthe payment flow betweencompanies and government are: (i) Decision makers holding companies accountable for the use o f those revenues; (ii) An improved investment climate since the government is committed to strengthening transparency and accountability over natural resource revenues; (iii) Mitigated investment risk for companies becauseo freduced corruption andpolitical instability; (iv) Benefits to civil society from increased information in the public domain about those revenues that governments manage on behalfo f citizens, thereby increasingaccountability and improving transparency. Source: EITI. Key Findingsand Recommendations 72. ModifL the royalty structure to take advantage of market booms. Based on the current metals market situation in Ghana, great potential exists for significantly increasing revenues that are derived from the mining sector without affecting the competitiveness o fthe sector. 73. Review the procedures for access to land and forests for mining activities, compensation, and rehabilitation after mine closure. The fact that the central government grants mineral rights without the consent o f landowners has created tensions between miners and landowners, who have to strike an agreement with a more powerful counterpart. Compensation for the land lost to mining i s also at stake. Onthe one hand, landowners feel that they are not fully compensatedfor all the values lost, which intheir opinion go beyond cash crops and trees, reaching biodiversity and cultural aspects. On the other hand, mining companies have aggravated this situation by paying different compensation amounts for similar lands. Moreover, the Land Valuation Board has endorsed this situation. And rehabilitated lands are not as fertile as they usedto be prior to mining activities, which means a permanent loss for the landowners. To complicate things, in many cases negotiation o f compensation i s carried out with the stool lands chiefs, who in several cases have misused the funds received. There i s a need, therefore, to review the entire 64 The EITIwas launched by the UK at the World Summit on Sustainable Development in South Africa 2002 and seeks to encourage governments, the extractive mining companies, international agencies, and NGOs to promote transparency in company payments and government revenues from oil, gas, and mining, and thus to improve revenue collection and contribute to sustainable development andpoverty reduction. 65 Some of the problems were related to (a) the lack o f leadership by an institution to ensure EITI implementation, (b) inadequate resources to organize and implementthe collection o f data, and (c) lack o f compliance with the EITI template standards because o f insufficient information (e.g., there are gaps in the data provided by the mining companies regarding dividends, bonuses, and fees; moreover, the CAGD's accounting and reporting system is too limited). - 90 - process to access land for miners in order to bring to it greater fairness and legitimacy. This requires empowering communities and landowners to conduct more favorable negotiations. More concrete suggestionsare provided inparagraphs 77 and 78. 74. Strengthen institutions to reinforce sector and environmental regulations. The EPA i s particularly affected by lack o f funding and the shortage of human resources. Moreover, institutional weaknesses for sector management are also present mainly from lack of funding. This insufficiency points to the need to strengthen the MDF, and ensure that it i s properly funded and capable o f monitoring the funds that are disbursed to miningand regional and local institutions. Also neededwould be decentralization of the EPA and an increaseinfunding(from a reform of the royalty system) at the district level for its monitoring and compliance activities. M o r eDetailedRecommendations 75. In the late 1980s and early 199Os, Ghana underwent a successful miningreform that led to a seven-fold increase in gold production in 2000. However, this impressive growth sector has not resulted in sizable improvements in the quality of life and growth perspectives of mining regions and local communities. Inspite of the adoption o f environmental regulations for the mining sector, environmental impacts of mining activities are still an important concern for mining activities, particularly those originating in ASM. Ghana continues to have important geological potential that goes beyond gold and diamonds to construction minerals and bauxite. To make the most of the contribution o f mineral resources to Ghana's sustainable development, a New Mining Law was recently enacted, and the government i s preparing a new mining policy. Therefore now i s a propitious time to highlight those issues that are critical to improving the environmental sustainability and social responsibility o f mining development from the existingpolicy, institutional, and regulatory framework for miningactivities inGhana. 76. MininginGhana has followed the pattern of an enclave economy. Besides the traditional factors that created this situation (such as the hightechnology embedded in mining equipments and machinery, and the high capital intensity o f the industry), policy factors have reinforced this situation and aggravated an already existing one o f unequal development inminingregions. Miningpolicy in the last 15 years has focused on creating an enabling environment to attract large foreign investors. This has shaped the legal, regulatory, fiscal, and environmental regime for mining activities. In spite of some success in attracting foreign investment, this has resulted in a marginalization of domestic miners, particularly ASM, and has largely excluded miningregions and local communities from the benefits o f development. Moreover, this environment has created tensions between a foreign investment-led development model and the aspirations of large sectors o f the population inminingregions. These tensions are very closely related to environmental and natural resource management, indicating that traditional mining policies in Ghana have only partially integrated environmental and natural resource management in their design and implementation. 77. The environmental and natural management issues that would need to be reconsidered and adjusted include access to land and forests for mining activities, and compensation and rehabilitation after mine closure. As stated in paragraph 73, key issues for mining to become a sustainable development driver at the local level i s to level the playing field between miners and landowners, and ensure that mining activities provide sizeable benefits not only to miners and GoG but also to landowners. This requires the consideration of new approaches for miners to access natural resources; enhancing transparency and fairness in compensating for land allocated to mining activities; and, revisingthe prevailing benefit sharing schemes, which mainly focus on the central government and the miners, sidelininglandowners and local communities inthe process. 78. Some suggestionsworth considering are: - 91 - (i) the establishment o f prior consultation with communities andor landowners affected by potentialminingactivities; (ii) a comprehensive framework for compensation, post-closure rehabilitation and benefit sharing, the principle would be that miningshould benefit miners as well as landowners, taking into consideration short and long-term issues; (iii) state institutions that grant mineral rights and have competence at local level should be involved in the process to guarantee fairness in the negotiation and to align their development plans for these communities with the opportunities opened by the mining project. 79. A policy focus not only on large, usually foreign investorsbut also on domestic miners. A comprehensive program dealing with issues of mining rights, access to appropriate technology and funding, and human and natural resources management for ASM is badly needed. ASM activities in Ghana have significant impacts on the environment; some of them involve child labor. Yet ASM i s a major source o f employment inthe country. Inorder for miningto become a source o f sustainable growth inGhanainsteadofa source ofconflict and social tension, humanrights inthe context ofthe relationship between large-scale miningcompanies and galamsey deserve especial consideration. 80. Institutional strengtheningto reinforce sector and environmentalregulations. As discussed inparagraph 74, finding creative ways to fundthe EPA through a strengthenedMDFis imperative. One way would be decentralizing the monitoring and enforcing functions of EPA at district levels and supporting these decentralized entities in the mining regions through MDF. Additional resources to support these activities would be available from an adjustment in the royalty system by allocating a portion o f the royalties accrued from miningto the EPA at the district level. This would also ensure that inthe miningdistricts the EPA would have the resources neededto monitor and enforce compliance of miningoperations with environmental regulations. Another need is to prepare a financial plan that takes into account the actual and future needs of sector institutions such as the GSD and their dependence on external resources. This would allow for the preparation o f a multiyear budget that could be financially sustainable. 81. Modify the royalty structure to take advantage of market booms. The current metals market situation presents a great opportunity for Ghana to significantly increase its royalty revenues without affecting the competitiveness of the miningsector. 82. Metal prices have increased markedly in the last two years, in several cases reaching levels that have not been seen since the 1970s. Gold prices more than doubled inthe last three years. As established inthe New MiningLaw, royalty rates inGhana can vary between3 and 6 percent; however, because of calculation procedures, it becomes a fixed rate prior to the start of the mine. As an increase in prices mainly translates into greater profits for the operations already established, one suggestion i s to allow for royalty rates to vary vis-&vis metal prices. Inthis way, the state could share part o f the windfall profits resulting from increases inprices. Ifthe price for the floor royalty rate (3 percent) is established taking into account the prices of the last 5 or 10 years, (reasonable periods for identifying an objective indicator), the current royalty rate would be significantly higher than 3 percent. 83. Redistribute revenues to strengthen institutional capacities and regional development. An increase in fiscal revenues i s strongly recommended to be used mainly for the following two purposes. The first would be to fund and strengthen MDF. Second, it would allocate additional funds for local and regional development as additionalresourcesto those already earmarked inthe MDF for local authorities. To guarantee the best use of these funds and to use them for leveraging additional funds, the creation o f a Development Fund (DF) is suggested. The fund would receive the corresponding portion o f mining royalties and contributions from other donors that will be spent according to a plan approved through public consultation with a mine's neighboring communities . - 92 - 84. These recommendations and other more specific and complementary to them are presented inthe following matrix (MiningSector RoadMap). - 93 - . . . . . . . . i-?. . . . 0 Y cd 3 Ba 1 9h 0 . . .I a0 I P e e o 0 0 0 e e . 0 0 e 0 0 0 e 0 e 5 LandResources Introduction 1. Land is a critical resource for Ghana's economic growth. It underpins the national economy by generating the bulk of the country's income and employment, both directly and indirectly. The agricultural sector-which contributes 38 percent o f the GDP, employs 45 percent of the active population (about 60percent of the rural labor force), accounts for about 75 percent o f the export earnings, and contributes to meeting more than 90 percent of the food needs of the country, has led Ghana's economic growth in the past. On the basis of present projections and the priorities set in the country's strategy for growth and poverty reduction (GPRS 11, GoG 2005), the agricultural sector will continue to bethe key driver for growth for Ghanainthe near future. 2. However, land degradation is increasingly affecting land resources in Ghana, thus undermining the growth potential. Past studies estimate that 69 percent of the total land surface i s prone to severe or very severe soil erosion (EPA 2002), the main manifestation of land degradation in Ghana. A recent study estimated soil erosion to cost around 2 percent o f the national GDP (World Bank et al. 2006), thus offsetting some of the past achievements o f the country interms of economic growth, and limiting the capacity of Ghana to fulfill its full potential for growth. Sustainable utilization of the country's land resources i s therefore a necessary precondition for achieving and maintaining the economic growth rate necessary for Ghana to reach its main development objectives of attaining the status o f middle-income country. 3. Evidence suggests that adopting sustainable land management technologies can reduce soil erosion and enhance productivity.A recent World Bank, DFID, and ISSER study (2006) concluded that sustainable land management (SLM) i s key to addressing land degradation in Ghana. However, evidence shows that large-scale adoption of SLM technologies continues to be limited in Ghana. This chapter completes and complements the previous study by analyzing indepththe key barriers and bottlenecks that prevent the scaling up of sustainable land management practices inthe country. Inparticular, this chapter will look at the policy, regulatory, institutional, and economic factors that prevent a large-scale adoption of SLM in Ghana. The chapter will then identify and propose a set o f actions that could unlock these barriers and help improve sustainable land management inthe country. 4. In line with the new architecture of development assistance in Ghana, and given the multisectoral nature of land degradation, this chapter recommends moving toward a more programmatic, multisectoral approach to sustainable land/landscape management. The chapter proposes a number o f actions that would contribute to developing a programmatic framework for sustainable landlandscapemanagement. These actions focus on (a) creating an enabling environment for sustainable land management (to strengthen and harmonize the policy, legal, and incentive framework), (b) strengthening SLM governance (to fortify cross-sectoral coordination mechanisms, streamline the existing institutional set-up, and build capacity), and (c) improving SLM knowledge management and monitoring and evaluation (to support policy and investment decisions through better knowledge management). The proposed actions could be implemented through a set of different implementation mechanisms and financial modalities, which integrate interventions in different landscapes (i.e., agricultural land, forest land, reserves, corridors, mines) and in different areashectors, including infrastructure, financial services, andprivate sector development.. 5. The chapter is organized as follows. Section 5-2 provides a general overview of the land resources-with a specific focus on the agricultural sector-and o f the scope, extent, causes, and impact of land degradation in Ghana. Section 5-3 describes some o f the existing sustainable land management practices in the country. Section 5-4 analyzes the key underlyingcauses that prevent a wide adoption of sustainable land management practices. Section 5-5 presents a set o f possible actions to scale up sustainable land management and address land degradation. Conclusions and a description of the possible - 9 6 - financingand implementingmechanisms are discussedinsection 5-6. Proposedactions are synthesized in arecommendations matrix insection 5-7. 6. The analysis is based on desk review of available literature and key policy documents (both published and unpublished), and on a series of consultations with key stakeholders (government, development partners, research institutions, and civil society organizations). It i s important to state at the outset that most o f the data on the extent and intensity o f land degradation in Ghana refer to studies undertaken in the 1980s. Although assumptions and methodologies on which these data have been built have a number o f underlyingweaknesses, they often are the only data available for analysis. 7. This chapter will focus mainly on agricultural land and onthe impactthat land degradation has on agricultural productivity. The impact of degradation of nonagricultural lands, i.e., forests and lands for mining, will be extensively treated in the chapters on forestry and mining. Nonetheless, solutions must comprehensively address land degradation inboth agricultural and nonagricultural lands. The aspects and the impact of land degradation not covered inthis Country EnvironmentalAnalysis may constitute an agenda for further research. LandResources and Land Degradation inGhana: Overview A. Economic and environmental significance of landresources 8. Land is a key resource for Ghana's wealth. As shown inFigure 5-1 below, most of the natural capital inGhana (which representsabout two thirds of the total wealth o f the country) depends directly or indirectly on land resources (World Bank 2006b). Cropland represents almost two thirds o f the natural capital inthe country. 3% 5% 0Subsoilassets: 5% 0Timberresources:22% 0Non-TimberForestResources (NTFR): 6% 0Protectedareas: 1% 0Cropland:64% 0Pastureland:3% Source: Adaptedfiom WorldBank 2006b. 9. The agricultural sector-which hasbeenleadingGhana's economic growth with a 6 percent average growth rate in the recent past (GoG 2005)-contributes 38 percent o f the GDP, employs 45 percent of the active population (GoG 2005) (about 60 percent of the rural labor force), accounts for about 75 percent of the export earnings (IFAD 2006), and contributes to meeting more than 90 percent of the food needs o f the country (EPA 2002). Within the agricultural sector, the livestock subsector, which mainly relies on permanent natural pastures, contributes to about 8 percent o f the Agriculture GDP (AGDP), which i s about 2 percent of the total GDP (GoG 2003). The industrial and service sectors, which account for about 12 and 28 percent of the GDP, respectively, also heavily depend on the -97- agriculture sector for raw materials and forward linkages (IFAD 2006). (A more detailed description of the agriculture sector inGhana is reported inAppendix 5-1.) 10. On the basis of current projections, the agricultural sector will continue to constitute the key driver for growthfor Ghana inthe near future (see Table 5-1). Table 5-1: GDP vs. Sectoral GrowthRate (2001-2009) 2001 2002 2003 2004 2005* 2006* 2007* 2008* 2009* 2001-09 Real GDP 4.20 4.50 5.20 5.80 5.80 6.11 5.83 6.06 5.72 5,47 Agriculture 4.02 4.36 6.06 7.49 6.50 5.24 6.71 5.18 6.60 5.8 Industry 2.93 4.73 5.06 5.13 5.80 6.11 5.83 6.06 5.72 5.26 Services 5.07 4.70 4.68 4.73 5.40 5.75 5.90 5.99 5.72 5.33 * Projected. Source: Adaptedfiom GoG2005. 11. Most of the rural households (which represent 63 percent of the total population; World Bank 2006) directly depend on land resources for their livelihoods. The majority depends on small-scale agriculture. Small-scale farmers dominate the sector, accounting for about 80 percent of the total agricultural production (GoG 2003). 12. Increasing agricultural productivity and developingan agro-based industrial economy are key pillars in the country's main strategy for growth and poverty reduction (GPRS 11, GoG 2005). Agricultural productivity inGhana depends primarily on soil productivity.66Sustainable utilization of the country's land resources i s therefore a necessary precondition for Ghana to fully develop its potential in agricultural development. 13. Land contributes to the provision, maintenance, and regulation of critical ecosystem functions.Landi s the key environmentalasset of the country and includes forests, wildlife, wetlands, and water resources. In addition, land provides habitats for biodiverse species; supports nutrient cycling; contributes to the provisioning o f food, fresh water, and wood; and helps regulate the climate and floods. For instance, the forest, savanna, wetland, and coastal ecosystemsprovide habitats for at least 2,975 plant, 728 bird, 225 mammal, and 221 reptile species. Ghana's forests provide a significant contribution to carbon sequestration(UNDP 2006). B. LandUsePatternsinGhana 14. About 63 percent of land in Ghana is considered agricultural land (World Bank 2005), i.e., land suitable for agricultural purposes. However, only 18 percent is currently under cultivation (World Bank 2006). Landunder irrigation i s only 0.5 percent o f agricultural land (IFAD 2006), or 0.04 percent of all land (GoG 2003). 15. Land use in Ghana is classified as agricultural or nonagricultural. Agricultural land use includes cultivation of annual crops, tree crops, bush fallow and other uses, and unimproved pasture; agricultural land represents 52 percent of the total area of the country. Nonagricultural land use includes forest reserves, wildlife reserves, unreserved closed forests, unreserved savanna lands, lands for mining, settlements, and institutional uses; this land covers the remaining 48 percent of the country's surface (Quansah 2001) (see Table 5-2 for breakdowns inland use). 66The agriculture sector inGhana, particularly inthe desertification-prone areas of the country, i s characterized by low input technologies (i,e., fertilizers, improved seeds, mechanization, etc.). Agricultural production depends primarily on soil productivity (EPA 2002). In this regard, FA0 (2004 in USAID 2005) describes declining soil fertility as the major constraint to agricultural production inGhana today. -98- Table 5-2: Percentage of land area affected by soil erosion Land use Area (1000 km2) Area (percent of total) 1. Agricultural --- Annual crops 12 5% Treecrops 17 7% Bushfallow and other 60 25% - uses Unimprovedpasture 35 15% Total Agricultural 124 52yo 2. Nonagricultural - Forest reserves 26 11% - -- Wildlife reserves 12 5% Unreservedforests 5 2% Savannawoodland 71 30% Total NonAgricultural 114 48% Total 238 100% Source: Adaptedfiom Ministry of Food and Agriculture 1990, in Quansah 2001. C. LandDegradationinGhana: Scope, Causes, Processesand Geographical Distribution 16. Land degradation6' in Ghana is increasingly affecting the country's land resources. According to the results of the GLASOD (Global Assessment of Human Induced Soil Degradation) survey, about 69 percent o f the land area inGhana i s affectedby moderate to very severe soil degradation (FA0 2000)68,69 (see Table 5-3). As shown in Table 5-4 below, the percentage o f area affected by soil degradation in Ghana i s well above the average for degraded land area in Sub-Saharan Africa (43 percent), and well above that for degraded land area in all Ghana's neighboring countries, excluding Togo. "Landdegradationisdefinedasreductionor lossofbiologicaloreconomic productivityoflandresultingfrom processes such as soil erosion; deterioration o f the physical, biological, or economic properties o f the soil; or long- term loss o f natural vegetation (Pagiola 1999). Soil degradation i s defined as declining o f soil quality, encompassing the deterioration inphysical, chemical, and biological attributes o f the soil (Enters 1998). Soil erosion i s a particular physical process that causes land and soil degradation, and refers to the wearing away o f the land surface by water andor wind, as well as to the reduction of soil productivity from the physical loss of topsoil, reduction inrooting depth, removal o f plant nutrients, and loss of water (ibid.) Desertification is land degradation inarid, semiarid, and dry subhumid areas resulting from various factors, including climatic variations and human activities (United Nations 1994). Landi s defined as "the terrestrial bio-productive systemthat comprises soil, vegetation, other biota, '' and the ecological andhydrological processesthat operate within the system" (United Nations 1994). At the moment, the GLASOD survey by UNEP and ISRIC between 1987 and 1990 remains the only uniform lobal source o f land degradation data. This estimate seems to be comparable with the results o f the Asiamah (1987) study reported in the National Action Program to Combat Drought and Desertification (EPA 2002), which estimated that 69percent o f the total land surface of the country is subject to severe soil erosion. An estimate o f the erosion hazards on a regional basis i s reportedinAppendix 4-2. -99- Table 5-3: Percentageof LandArea Affectedby Human-InducedSoilDegradation(Ghana) Severity of Area Area degradationa affected affected (kmZ) (percent of total) Light 60,000 25% Moderate 142,000 60% Severe 7,000 3% Very severe 15,000 6% Source:Adaptedfrom F A 0 2000. a. Severity of degradationi s defined as follows: .... Light: somewhat-reduced agricultural suitability; Moderate: greatlyreducedagricultural productivity; Severe:biotic functions largely destroyed, nomeclaimableat farm level; Very Severe:biotic hctions fully destroyed, nomeclaimable (Oldeman et al. 1990, inFA0 2000). Table 5-4: Percentageof LandArea Affectedby "Moderate to Very Severe" Soil Degradation (Cross-country Comparison) Ghana SSA Ivory Cost Mali Niger Benin Burkina Togo (average) Faso 69% 43% 18% 36% 45% 46% 68% 76% Source:Adaptedfrom F A 0 2000. 17. Approximately 30 to 40 percent of the total land area of Ghana is estimatedto be subjectto desertification (EPA 2005), i.e., land degradation in arid, semiarid and dry subhumid areas. About 72 percent o f the whole land area of the country i s considered vulnerable to desertification (about 16percent highlyor very highly) (see Table 5-5). 18. Land degradation is rising: according to the National Action Program to Combat Drought and Desertification, the land area prone to desertification has almost doubled inthe last decades. In addition, pressure on land resources i s likely to increase in the next few decades from population growth and growth infood demand (90 percent of the food needsof the country depend on the agricultural sector). Table 5-5: Percentageof LandArea Vulnerable to Desertification Vulnerability Area vulnerable (percent) Low 7.47percent Moderate 48.78percent High 15.15percent Veryhigh 1.04percent Source: EPA 2002. 19. Land degradation is a complex phenomenon, influenced by a multitude of direct and indirect factors. Unsustainable farming practices (particularly the traditional bush-fallow system) and removal of vegetation cover (mainly through deforestation and overgrazing) are the main direct causes of land degradation in Ghana. It i s estimated that more than two thirds of the degraded area inthe country i s a consequenceo f unsustainable agricultural activities, twice more on average than in Sub-SaharanAfrica -100- (FA0 2000). Populationgrowth andpoverty arethe mainsocioeconomic factors indirectly contributingto land degradation (see Box 5-1 and Box 5-2). The major direct factors causing land degradation, which include biophysical factors (e.g., physical characteristics of the soil, topography, and climate conditions) and anthropogenic factors (e.g., unsustainable farming practices, removal o f vegetation cover, mining activities, and urbanizationand industrial activities), are extensively discussed inAppendix 5-3. Box 5-1: PopulationGrowth and Land Degradation Rapid population growth is putting land resources under pressure because it is often accompanied by unsustainable agriculture intensification, shifting cultivation to marginal areas, deforestation, and overgrazing. Ghana has experienced a rapidpopulation growth inthe last decades. Population almost tripledover the last 40 years, from 6.7 million in 1960 to 18.4 million in2000 (Ghana Statistical Service 2000). Based on current population growth rates (2.7 percent), the World Bank estimated a population o f 20.3 million in2003 and 25.8 million in2015 (World Bank 2006). It is estimated that 63 percent o f the total population lives in rural areas (World Bank 2006), and that 51.4 percent o f the total population lives inthe zones most vulnerable to land de adation (Coastal, Guinea, and Sudan Savannas) (EPA 2002). Population density has increased from 36 p e r s o n s h !?in1970 to 77 personsh' in2000. In the Upper East, Upper West, and Northern Regions, the regions most prone to land degradation, population density has increased between 1984 and 2000 from 87,24, and 17 to 104,31, and 21 personsh', respectively, an increase o f 20,29, and 24 percent, respectively (Ghana Statistical Service 2000). The mainimplication o f these figures i s that pressure on the natural resource base, and particularly on land, has increased over the last years, and will likely continue to increase inthe years to come. The availability o f agricultural landper capita has already decreasedfrom 1.56 hdperson in 1970 to 0.74 hdperson in 2000 (EPA 2002). In the absence o f a change in the current farming system, and in an economic system where the agriculture sector employs the majority o f the population, and in which the majority o f the rural households depend almost entirely on landresources for their livelihoods, population growth will result in increased land degradation, mainly from unsustainable intensification, shifting cultivation to marginal and fragile areas, deforestation, and overgrazing. Moreover, the small margins between overall growth rates o f the agriculture sector vis-&vis the annual population growth rate (EPA 2002) may well undermine the attainment o f food security, employment generation, and improvement inrural incomes and national economy. Box 5-2: Poverty andLandDegradation The incidence o f poverty inGhana is concentrated inthe areas most vulnerable to land degradation, thus suggesting a correlation between poverty and land degradation. In Ghana, the incidence o f poverty i s higher in rural areas. About 50 percent o f the rural population in 1998-99 (World Bank 2005) -which constitutes 63 percent o f the total population (World Bank 2006), 59 percent o f food crop farmers, and 55 percent o f people employed in agriculture (GoG 2003) - lived below the poverty line. Poverty in Ghana is concentrated inthe Upper East, Upper West, and Northern Regions. According to the Growth and Poverty Reduction Strategy I(GoG 2003), 88, 84, and 69 percent, respectively, o f the people living inthese regions were classified poor in 1999 (income poverty). These regions are more vulnerable to land degradation. An analysis from Osgood and Lipper (2001), which combined the use o f spatially referenced GIS with socioeconomic data in Ghana, observes that increased soil degradation is associated with higher incidence o f poverty. Although these results do not necessarily prove a causal relationship between poverty and land degradation, they nonetheless suggest that poverty couldbe a determinant insoil degradation. Poor people, who rely on natural resources for their livelihoods, are in fact often forced-for their short-term survival-to unsustainably exploit their natural resources. Poor people in Ghana tend to be highly dependent on natural resources, including land, vegetation, water, and other land-based resources, for their livelihoods and income generation opportunities (EPA 2002). According to the Growth and Poverty Reduction Strategy I(GoG 2003), the majority o f rural households depend on small-scale agriculture for their livelihoods. In a situation o f rapid population growth, these farmers may lack the incentives, the means, or the options to diversify their type o f livelihood, or to adopt new technologies. Therefore they may be forced-for their short-term survival-to unsustainably exploit their natural resources, or-in the absence o f access to the best or equally productive lands- to move to new, marginal, fragile areas. Cultivation in Ghana i s already taking place in marginal lands in some regions, particularly the Upper East (EPA 2002). In addition, because o f the high dependence o f the poor on their natural resources, loss or deterioration o f these resources is more costly to them. The reduction o f crop yield because o f soil erosion and nutrient depletion will infact reduce the poor's source o f income or increase the costs to maintain the same crop yield, which, inmany cases, they cannot afford. -101- 20. Paradoxically, agricultural production has increased in spite of the scope of land degradationin Ghana. Despite the fact that one of the main effects of land degradation is a decline in soil productivity, agricultural production in Ghana has increased in the last 10 to 15 years. The average annual growth between 1990 and 2003 has been 3.6 percent (World Bank 2006). Between 1995 and 2003, cereal production increased by about 16 percent and root and tuber production by 38 percent (ISSER 2004, inWorld Bank et al. 2006). 21. However, increases in agricultural production are primarily the result of the extension of cultivated land:' and only to a limited degree from increases in productivity through improved technologies (improved seeds and f e r t i l i ~ e r )(EPA 2002). According to the National Action Program to ~ ~ Combat Drought and Desertification, the expansion of cultivated area contributed to about 57 percent o f the overall growth rate, and increases in productivity to about 37 percent. Increase in output has in fact been accompanied by relatively constant yield per hectare (see Table 5-6 and Table 5-7, and Figure 5-2 and Figure5-3). Table 5-6: RootdTubers: Production,CultivatedLand, and Productivity(1995-2003) Year output Area Yield/ha (thousands of (thousands of tons) ha) 1995-99* 13,151 1,25 1 10.51 2000 15,027 1,412 10.64 2001 16,275 1,540 10.56 2002 17,770 1,653 10.78 2003 18,186 1,691 10.78 Variation 95-03 +38% +35% +3% * Average. Source: Adaptedfi-om ISSER 2004, in World Bank et al. 2006. 70Arable landincreasedby about 54 percent between 1999 and2002 (World Bank2006). "Fertilizerconsumptionfellfrom21.9kghaofarablelandin1978(EPA2002)to3.6kg/hain1989-91following the introductionof the structural adjustment program and the removal of most of the agriculturalsupport, including fertilizer subsidies. Fertilizer consumption then increased in the 1990s after an improvement in the national economy and reached 6 kg/ha in 2000-2002 (World Bank 2005). However, this quantity represents almost half of the quantity of fertilizer per hectare of arable land in Sub-SaharanAfrica (FA0 2005), and almost one tenth of the quantity offertilizer per hectare indeveloping countries(GoG2003). -102- Table 5-7: CereaYCrops:Production,CultivatedLand, and Productivity(1995-2003) Year output Area Yieldha (thousands of (thousands of tons) ha) 1995-99* 1,753 1,297 1.35 2000 1,711 1,307 1.30 2001 1,648 1,373 1.20 2002 2,155 1,598 1.35 2003 2,042 1,463 1.40 Variation 95-03 +16% +13% +4% * Average. Source: Adaptedfrom ISSER 2004, in WorldBank et al. 2006. Figure5-2: Percentageof Increasein Production, CultivatedLand, and Productivity(Roots/Tubers) 1999-2000 2000.2001 2001-2002 2002-2003 +Output +Area +Productivity Source: The author Figure5-3: Percentageof Increasein Production, CultivatedLand, and Productivity(CereaYCrops) /-4-OutDut +Area +Productivitv I Source: The author 22. In addition to this, growth performance of the agriculture sector has considerably benefited from the excellent achievements in one subsector, the cocoa sector, whereas other subsectorsremained relatively stagnant, as shown inTable 5-8 (GoG2005). -103- Table5-8: ProductionGrowthinthe Agricultural Sector and Subsectors (2002-2004) Agriculture Cocoa production Crops and Forestry and and marketing livestock logging 2002 +4.4% -0.5% +5.2% +5% 2003 +6.l YO +16.4% +5.3% +6.1% 2004 +7.5% +29.9% +5.3% +5.8% Source: GoG2005. 23. Land degradation in Ghana can be attributed to physical (in the form of soil erosion, compaction, crusting, and iron-pan formation), chemical (depletion of nutrients, salinity, and acidification), and biological(loss of organic matter) processes. Soil erosion i s the primary form of land degradation in Ghana (EPA 2002). A more detailed description of the processes o f land degradation in Ghana i s reported in Appendix 5-4. The main forms of soil erosion in Ghana are sheet erosion through surface runoff, rill erosion in permanent and shifting microchannels, and gully erosion in permanent channels (EPA 2002). 24. Land degradationis geographicallywidespreadin all areas of the country.Soil erosion, inits various forms, i s present in all ago-ecological zones and regions, although the most vulnerable zone in the country is the Northern Savanna (Guinea and Sudan Savannas); this zone covers about 50 percent of the country, the Upper East Regionbeing the most degradedarea (see 25. 26. Figure 5-4-the darkest areas are the most degraded). Although nutrient depletion i s also a widespread phenomenon inthe country, the Sudan and Central Savanna zones are the most vulnerable to chemical erosion becausetheir soils are already low inorganic matter. Salinity i s aproblem o f most o f the soils along the coast (EPA 2002). Figure 5-4: Distribution of Soil DegradationinGhana Source: GLASOD in Osgoodet al. 2001." D. Economic, Environmental, and Social ImpactofLandDegradationinGhana 27. Land degradationhas a potentiallysignificantnegative economic impact on the agricultural sector and therefore on Ghana's economy and economic growth. The agricultural sector is the main contributor to GDP and to employment (particularly among the poor). Inaddition, it i s the sector that will 72http://www.fao.ornldocuments/show cdr.asD?url file=//docre~/004/v1796e/y1796e04.htm -104- lead the industrialization process, according to the GPRS I1(GoG 2005). However, in a country where - as explained earlier - agricultural production depends mostly on soil productivity, and inthe absence of technological improvements, land degradation has negative economic implications that are potentially significant. First, depletion o f soil nutrientsand loss of organic matter reduce soil productivity, which in turn will reduce crop yield.73This has a direct negative impact on both,income generatiodcash saving opportunities and food security, particularly inthe presence o f a rapidly growing population (see Box 5-1 on the relationshipbetween population growth and land degradation inGhana). Second, land degradation associated with deforestation-one o f the major direct causes of land degradation in Ghana-results ina reduction of forest products (wood and nonwood, both for domestic consumption and for export), and in negative consequences on both income generation and rural livelihoods. Finally, the reduction in the quality and quantity of vegetative biomass associatedwith land degradation negatively affects livestock productivity, and has negative implications for income generation, food security, and rurallivelihoods. 28. Moreover, land degradation has a significant impact on the environment and natural resource base of the country. Land contributes ineffect to the provision, maintenance, andregulation o f critical ecosystem functions, such as a habitat for biodiverse species; nutrient cycling; provisioning of food, fresh water, andwood; and climate, flood, and so on. The consequenceso f degrading landresources are many: loss of vegetation cover and biodiversity; instability inhydrological regimes; a reduction inthe land's resilience to natural climate variability (see Box 5-3 for a brief discussion on the potential impact of climate change on land resources in Ghana); and increased vulnerability to natural hazards. These include such hazards as droughts and a number of off-site damages, such as downstream flooding and sedimentation and siltation in rivers and lakes. For example, the Volta River and Lake-which provide several ecosystem services that form the basis for a rich biodiversity and other environmental goods- have been increasingly damaged by severe environmental degradation in the form of lake level fluctuations, water scarcity, nitrification, and siltation mainly from watershed degradation (soil erosion and deforestation) (World Bank et al. 2006). Box 5-3: PotentialImpact of Climate Changeon Land Resources and EconomicGrowth in Ghana The impacts of climate change on land resources in Ghana have not yet been studied in depth or quantified. However, it seems likely that climate change, inthe absence o f an adaptation strategy, will negatively affect land resources in Ghana, and have a potentially negative impact on agricultural productivity and economic growth. Climate change will infact probably result in, among other things, increased rainfall variability, and an overall drop inrainfall (10 percent lower rainfallis expected by2050; IPCC 1997); this would increase the chancesofdrought periods and probably reduce agricultural productivity. Moreover, climate change will probably result in rising temperatures (1.4-1.6 higher temperature is expected by 2050; IPCC 1997), potentially resulting inincreased forest and bushfires. Finally, it will probably also lead to increased evaporation, resulting in reduced soil quality. Moreover, climate change may also contribute to accelerated coastal erosion, to which Ghana is particularly vulnerable (World Bank et al. 2006). 29. Land degradation may have significant social costs. Reduction o f soil productivity and associatedincreased food insecurity-particularly inthe northern regions of the country - and reduction of available land from coastal erosion both contribute to the abandonment o f previously productive lands and increasedmigration (from north to south and from rural areas to urban centers). This degradation will have potentially highsocial costs, includingunemployment and loss of cultural identity (EPA 2002). 30. A recent World Bank, DFID,and ISSERstudy (2005) estimatedthat the annual cost of land degradationwould range from 1.1 to 2.4 percent of the GDP. This figure would correspond to about 2.9 to 6.3 percent o f AGDP. It i s in line with other past estimates o f the cost of land degradation in Ghana. Convey and Tutu (1990), for instance, estimated the cost o f annual production loss through 73As explained inparagraphs 21-22, increases inagricultural production were mainly from expansion o f cultivated land, rather than from intensification, and from the outstanding performances inthe cocoa sector. -105- erosion and nutrient depletion to be about 5 percent of the AGDP. Drechsel and Gyiele (1999) assessed the costs of productivity loss at around 4 to 5 percent of the AGDP. The World BanMDFID/ISSER figure i s considered conservative, as it only considers soil erosion from water and does not consider the impact of livestock overgrazing on soil degradation, other physical degradation, the off-site effects of land degradation, and environmental or social costs from land degradation. All of this suggests that the economic, environmental, and social cost of land degradation inGhana could be even higher. I Box 5-4: LinkagesbetweenLandDegradation,ForestryandMiningActivities I Deforestation represents probably the most serious form o f natural resource degradation inGhana, and is one o f the main direct causes of land degradation in the country. Rapid population growth fiels the demand for more agricultural land and for fielwood and other wood products (e.g., charcoal). The reduction o f soil fertility/productivity in turn forces farmers to expand their cultivated lands and clear forest areas. The poor enforcement o fregulations favors unsustainable logging practices and indiscriminate fielwood extraction. A market price that is lower than the real value o f wood further contributes to overexploitation o f forestry resources in the country. Rehabilitation and sustainable management o f degraded forestlands should be an integral part o f any intervention aiming at addressing land degradation inthe country. Mining andparticularly illegal mining activities are one o f the direct causes o f land degradation and most specific to the Ghanaian context. These activities are infact accompanied by deforestation and removal of the fertile topsoil of adjacent agricultural lands. Solutions to Land Degradation: SustainableLand Management in Ghana 31. Evidence suggests that sustainable options that can reduce soil erosion are currently adopted in Ghana.Infact, several low-input technology conservation practices used inthe country are socially acceptable and technically feasible, and can substantively reduce land degradation while enhancing productivity. These practices andor technologies are generally known as sustainable land management (SLM), and may represent a viable solution to land degradation inGhana. 32. At micro/farmer level, Table 5-9 below summarizes the benefits, in terms of reduction of soil loss and improvement in crop yields, of some of the technologies used in the country. For instance, the practice o f zero-tillage with herbicide application in various ecological zones has demonstrated its potentialto reduce soil erosion bymore than 80 percent and increaseyields by more than 50 percent, compared with the traditional slash-and-burn system (Boa-Amponsem et al. 1998, in World Bank et al. 2006). -106- Table 5-9: Benefitsof Low-input Technologiesin Mitigating the Effectsof LandDegradation Technology Ecological zone Benefits 1. Cover crops a. Macuna Transition/ Semideciduous Control weeds and increase soil nitrogen from Forest 0.14 to 0.18percent. Increased maize grain yieldby 86percent b. Groundnut Guinea Savanna Reduced soil loss by 94percent andrun-off by Semideciduous Forest 70percent. Reduced soil loss by 66percent andrun-off by 24percent. c. Bamabra nut Semideciduous Forest Reduced soil loss by 57percent and run-off by 38percent. d. Cover crops (cowpea) Semideciduous Forest Reduced soil loss by 79percent andrun-off by 38percent. 2. Strip cropping (maize- Transition Zone Reduced soil loss by 92percent and run-off by cowpea, maize-groundnut) 70percent. 3. Zero-tillage Sudan SavannaTransition, Reduced soil loss by 80-99percent and run-off Semideciduous Forest by 76-99percent. 4. Zero-tillage with weedicide Sudan SavannaTransition, Raised yield by 50percent more than Semideciduous Forest traditional slash and bum. 5. Mulching Guinea Savanna Transition, Reduced soil loss by 90percent. Semideciduous Forest 6. Contour/vegetative barriers Semideciduous Forest Controlled soil erosion and conserved moisture to increase maize yields. 7. Liming(acid soils) Highrain forest Reduces soil loss when liming rate increased from 1t/ha to 5 tha. 8. Organic matter Guinea Savanna Transition Reduced soil loss and increased crop yields. Semideciduous Forest Yield for maize increased from 1.94 t/ha to 3.16 t/ha. 9. Crop rotation (groundnut- Guinea Savanna Reduced soil loss and increased yield. Maize maize, cowpea-maize) yieldincreased from 2.11 t/ha to 4.82 t/ha and 4.75 t/ha respectively Source: Adaptedfrom Quansah 2001, in WorldBank et al. (2006). 33. Among the various SLM systems, conservation ~griculture'~(which involves techniques described inTable 5-9 above, under Technology, items 1-5) seems to represent a viable option to reduce soil erosion and improve productivity inthe country. Inter-cropping agro-eco~ystems~~ also reduce runoff and soil erosion (Bonsu et al. 1979, inOD11999) and are commonly adopted inGhana, particularly inthe Northern Region (Diehl 1984, in OD1 1999). Agro-forestry, however, has shown mixedresults in Ghana (OD1 1999) and Carter 1995, in OD1 1999). Appendix 5-5 describes inmore detail the technical options for soil conservation in different agro-ecological zones, the characteristics of some indigenous soil and water conservation systems inNorthern Ghana, the risks and the long-term effects associatedwith various 74Conservation agriculture is a farming approach that makes more efficient use o f soil, water and biological resources, and naturalprocesses through improved soil-water-plant nutrient management. 75Intercropping is defined as "the growing o f two or more crops simultaneously on the same plot for a significant part o ftheir growing period" (Adolph et al. 1993, inOD11999). -107- SLM practices in Ghana, and an assessment of the various methods for soil fertility management in Ghana. 34. Despitethe existence of a significant number of sustainable land managementpractices,and potential benefits at both farmer and aggregate level, large-scale adoption of these practices continuesto be limited in Ghana. This fact suggests that technological solutions alone cannot represent the solution to land degradation, and that there are other factors-beyond technical feasibility-that prevent SLM from being adopted. The next section will examine and discuss the underlying factors preventing a large-scale adoption of SLM technologies in the country, factors that are responsible for continuing land degradation. Why SLMis notwidely adopted:Underlyingcauses 35. Past efforts that aimed at addressing land degradation focused on the symptoms, rather than on the root causes of land degradation (TerrAfrica 2005). Failure to understand the real underlying causes of land degradatiodlimited adoption of SLM technologies results in failure to successfully tackle the problem. A. Policy Barriers A-1:Weak implementation 36. Most environmentaland agricultural policies and strategies reflect sustainable management concerns. The principles o f the sustainable management of environmental resources, sustainable use of land, and restoration o f the productive capacity of degradedresources are captured inmost of the sectoral policies and action plans. These include Ghana's Environmental Policy, the National Environmental Action Plan (NEAP), the Soil Fertility Management Plan, the Accelerated Agricultural Growth and Development Strategy (AAGDS), and the recently formulated National Wildfire Policy and Water Policy (being finalized), among others (see Appendix 5-6 for a more comprehensive overview of the existing policy framework). The National Land Policy (see Appendix 5-7 for a more detailed description of the goal, guiding principles, and policy provisions) i s the key policy that addresses land sector issues in Ghana. This policy strives toward the judicious use o f the nation's land and other natural resources in support of the various socioeconomic activities, and endorses the principle of sustainable resource management. More specifically, the Land Policy provides the framework for dealing with the issues o f land ownership, security o f tenure, land use, and conservation on a sustainable basis. Finally, the National Action Program to Combat Drought and Desertijkation (NAP) provides a long-term strategy to address land degradation inaffected areas inGhana (see Appendix 5-8 for a more detailed description of the main purpose, overall objective, thematic Action Programs and Action Plans, institutional set-up, and financing mechanisms). 37. However, implementationcontinues to be a challenge.Although the National LandPolicy sets the framework for the development of subsequent instruments, neither an action plan nor an implementing strategy exists to set targets, activities, timeframes, funding, and implementation mechanisms. Development o f a LandUse Action Plan could be an important tool to implementthe policy provisions of the Land Policy. The National Action Program to Combat Drought and Desertification (NAP) also provides a quite comprehensive set of detailed and well-budgeted action programs and action plans (see Appendix 5-8). However, in spite of parliamentary approval in 2004, the NAP still remains unimplemented. In the absence o f clear political will, evidenced by lack of clear budgetary allocation from the government or identification of the issue as a national priority, implementation will continue to remain a challenge. A-2: Weak integration -108- 38. Sustainable land management is still weakly integrated in most other key policies, strategies, and action plans. For instance, the first Food and Agriculture Sector Development Policy (FASDEP, 2002) only marginally discusses the use of sustainable land management technologies and practices. The Ghana Poverty Reduction StrategV I (GPRS I,GoG 2003)-the main strategy for promoting growth and reducing poverty4oes not include sustainable land management among its priorities. On the contrary, emphasis i s placed on modernizing agriculture, which, if elements of sustainability are not carefully taken into consideration, may contribute to increased land degradati~n.'~ The strategy does include a few considerations on land degradation and the sustainable use o f natural resources, butnot ina systematic way. Overall, the GPRS Ilacks a comprehensive strategy to address the many factors that inturn result invarious forms o f land degradation, and it only indirectly deals with the problem o f land degradation through the government's reforestation program. Although the NAP provides an overall strategy to deal with the issue of land degradation, its key elements were weakly integrated. 39. Considerations of the impact of land degradationreceive more attention inthe Growth and Poverty Reduction Strategy II (GPRS 11, GoG ZOOS), but integration is still limited. Inthe GPRS 11, land degradation that i s associated with unsustainable agricultural practices, and low crop yields and outputs that result from low soil fertility, are acknowledged as key challenges to the growth potential of the agricultural sector, and, consequently, to the growth potential o f the country. The strategy also gives more emphasis to natural resource management, and identifies a number of interventions that could- directly or indirectly-favor the wider adoption of sustainable land management practices. These practices include reforming land acquisition and property rights, improving access to rural credit, and increasing access to markets through improvements in farm roads, among others. However, sustainable land management does not clearly emerge as an agreed-upon strategy to improve agricultural productivity-instead, it is presented in a narrow way as an element for ensuring environmental sustainability. Moreover, the general focus of the strategy remains agricultural modernization rather than land productivity, and strategic interventions seem to favor the restoration of degraded resources rather than their sustainable management. Inconclusion, although the GPRS I1offers anumber o f possible entry points for integrating sustainable land management, the document's treatment of the results o f sustainable land management i s unfortunately weak. Because the GPRS serves as the reference framework for the government and DP development strategies, this is a major shortcoming. A-3:Policy gaps 40. Although the government has developed a policy framework that seeks to address the issue of land management comprehensively, some gaps are in evidence. For example, although there i s some recognition of the importance of agricultural lands, no instrument i s in place that stipulates the principles for their management. The Crop Service o f the Ministry o f Food and Agriculture (MoFA) has embarked upon the development o f a policy that would help to guide land use planning. The development of the policy provides an opportunity to better integrate sustainable land management into the existing policy framework. At the same time, the revision o f the NEAP, whose implementation ended in2000, and the need to incorporate the new conditions in it, plus the ongoing process of reviewing the FASDEP, represent two important opportunities to mainstream sustainable land management inthe country's policy framework. 76For example, the introduction o f large-scale mechanized farming in the 1970s inthe north o f the country created several environmental problems, including soil erosion, degradation o f soil structure, decrease o f soil matter content, and compactation, among others (Van der Mejden 1998, inOD11999). -109- Table 5-10: Policy Issuesand Impacts onLand DegradatiodSLM . Issue Impact . Implementation ofthe landpolicy remains a Issues highlighted by the Land Policy andby the challenge. NAP are not addressed. Implementationo fNAP has not yet started. Implementation ofprograms to address land . Allocation ofpublic resources to address land degradation or to promote S L M we not supported by degradation is limited. adequate financial resources. Land degradation and S L M elements are weakly . Approaches to address land degradation are not . integrated into the key development and sectoral integrated and do not address the cross-sectoral policies, strategies, and action plans nature of the problem. Land degradation does not appear among the Somepolicieshtrategies may be inconflict with the development priorities ofthe country objective o f addressing land degradation, andfor may hinderthe adoption of SLMpractices. . Nopolicy exists onthe management of the No general principles or specific provisions onhow agricultural lands. to manage (agricultural) land exist. No landuse actionplan exists. No guidance i s provided for landuse planning. B. Legalbarriers B-1: Complex legal framework 41, The legal framework governing land administration and land management is complex.77 Various pieces of legislation that the government has enacted to address fundamental land issues in fact overlap with the existing traditional system; the latter i s recognized as an equally legitimate source of law in Ghana. The resulting framework is characterized by an intricate combination of constitutional provisions, common law principles, enacted legislation, and traditional law. Approximately 166 land laws inGhana deal with land issues (see Appendix 5-9 for a list of the major land laws). The plethoraof land laws has resulted in the existence of outdated laws and, in some instances, inconsistencies and contradictions within the legislative framework. For example, the Lands Commission Act of 1971 (Act 362) established the Lands Commission. Yet the Lands Commission Act o f 1994 (Act 483) also established the Lands Commission and provides for its composition, qualification, appointments of members, and matters related to the commission. However, Act 483 does not expressly repeal Act 362. The absence of express repeal provisions in the act creates confusion about which law is operative. Furthermore, inconsistent and outdated legislative provisions make it difficult to determine which legislative provisions are operative, and by extension, weaken the framework that was created for administering lands. B-2: Landregistrationandtilting system 42. Unclear demarcation of boundaries increases transaction costs and reduces incentives for long-term investments in land management. Land in Ghana i s either public or private. Private land- which represents the majority o f the land in Ghana-is, in most parts of the country, held by the traditional authority ("stool"' or "skin") in trust for the community. Traditional law regulates access to and tenure o f stooVskin lands. However, stooVskin lands often have unclear boundaries. This problem i s a direct result of a dearth of legal and institutional mechanisms to provide accurate maps, data, or plans. This lack often results in protracted litigation in the court system as landowners seek to assert their property rights. Litigation often freezes the land for development; frequently, there are encroachments on the land. This situation contributes to haphazard developments that often reduce the incentives for long- term investment inlandmanagement. 77Issuesconcerning landownership are discussed indetail inthe section below, "Tenure Security." -110- 43. An inefficient and nontransparentsystem of land titlingcomplicates the matter.Land i s not always registered, and transactions have been often oral. The same parcel o f land i s therefore often sold to or claimed by multiple ownershers. The result is an increased number o f land-related cases (acquisition and litigation), which in turn raise the number o f backlog cases; thus transaction costs rise, and tenure security decreases (see the section below, Incentive Barriers"). Ultimately, the incentive for investments inlandmanagement is weakened. B-3: Weak enforcement and compliance 44. Overall weak enforcement and compliance with the environmental laws continues to be a challenge.The key issues that have impeded adequate implementation and subsequent compliance with the law include an overall weak capacity, including lack o f adequate resources, to cover the operation costs. As a result, illegal activities that negatively impact on land, such as bushfires inforest areas, illegal logging and miningactivities, or cultivation over river banks and hillsides, remain largely uncontrolled. Table 5-11: RegulatoryIssuesand Impacts on Land DegradatiodSLM Issue Impact Multitudeoflaws andregulations, often Unclear regulatory framework increasesland-related contradictory or outdated litigation, impacts on compliance, increases Co-existence o f statutory and customary law transaction costs, and, overall, reduces incentives for long-term investments inlandmanagement. Unclear demarcation o fboundaries1lack o f accurate 1 Landdisputes increase, tenure security is reduced, maps and incentives for long-term investments inland Lack o f proper landtitling/ oral transactions management weaken. rn Transactioncosts increase, which reduces available resources for investing inland management. Weak capacity to enforce laws andregulations rn Illegal activities remain largely uncontrolled and undermine the effectiveness o f legislative provisions designed to address land degradation. C. InstitutionalBarriers C-1:Duplicationo fRoles andResponsibilities 45. The existing institutionalset-up-characterizedby duplication of roles and responsibilities andby the absence of an SLM "champion"4oesnot provide a clear directionfor landutilization and management. Land management and administration in Ghana is the responsibility o f a number o f ministries and governmental agencies. At least 10 agencies and institutions at the central level have- directly or indirectly-a mandate for land management and administration in the However, these institutions have mandates that are often not well defined and are sometimes conflicting. This makes it difficult to identify the right authority to deal with land issues, and to pin down the institutional accountability. For example, it is not always clear whether land management i s the mandate o f the Ministryof Environment and Science (MES)-which i s responsible for the environmental sustainability o f the country-of the Ministry o f Lands, Forestry and Mines (MLFM)-which i s responsible for the use 78These include: the Ministry o f Environment and Science (MES), the Ministryo f Food and Agriculture (MoFA), the Ministry o f Lands, Forestry and Mining (MLFM), the Environmental Protection Agency (EPA), the Lands Commission, the Land Title Registry, the Deeds Registry, the Land Valuation Board, the Office o f the Administrator o f the Stool Lands, the Survey Department, the Forestry Commission, the Water Resource Commission, and the Department of Cooperatives, among others. -111- of the state lands and forestry reserves-r of the Ministry o f Agriculture-which i s responsible for agricultural lands(including forests that are not reserves). 46. Different institutions, reporting to different ministries, manage land administration and land use planning. Six different institutions-with often overlapping mandates-fall under the MLFM and manage land admini~tration.~'Land use planning at the national level i s the responsibility o f the Survey Department. At the local level, however, land use planning is in the mandate of the Town and Country Planning Department, which falls under the MES. As a result, land use at the local level i s not always consistent with that plannedat the national level. C-2: Weak Coordination 47. In addition, weak coordination does not favor a comprehensive and integrated approach toward land degradation,Coordination among government agencies i s generally weak, especially at the national level. Opportunities and forums for strategic dialogue between the MES, MLFM, and MoFA are in fact limited. The MES seems not to have either the resources or the political weight to play a coordinating role in the environment/NRM sector. The cabinet could and should play a key role in coordinating line ministries, but has not taken this initiative, because it lacks either the technical capacity or political commitment. A provision found in all groups calls for each line ministry to establish an "environmental desk." This provision would enhance cross-sectoral coordination. However, MoFA i s the only ministry at the moment that has established sucha desk. An interministerial technical committee was established, but it i s not functioning because of insufficient resources. A National Desertification Committee was also established in the framework of the NAP, but it has been dormant so far. Weak intersectoral coordination, particularly for such a cross-cutting issue as land degradation, makes policy harmonization and coherence more difficult and reduces information flow; this leads to uncoordinated interventionsand an inefficient or suboptimal allocation o f resources. C-3:Weak institutionalcapacity 48. Furthermore, an overall weak institutional capacity for dealingwith land issues exists at all levels.'' A generally poor institutional capacity includes, specifically-but i s not limited to- planning/participatory planning, policy development, overall strategic thinking, data collection, and technical issues (e.g., technical requirements of SLM practices, knowledge o f what works where, and mitigation measures). 49. Lack of capacity is particularly serious regarding monitoring and enforcement activities. Limited numbers of properly trained staff cannot effectively implement and enforce policies, programs, and regulations. This includes controlling those illegal activities directly responsible for land degradation, such as illegal logging, illegal mining, bushfires, encroachment inforest reserves, and cultivation on river banks and hillsides. 50. Some of the main reasonsfor the weak SLMcapacityinclude: (i) Focus on productiodcommodities, rather than on land productivity and resource management inthe government's policy agenda. (ii) Focus on technological aspects of land degradation, rather than on socioeconomic factors that determine adoption o f technologies in the research agenda o f the key research institutions. ''TheLand Commission, the Survey Department, the LandValuation Board, the Title Registry, the Deeds Registry, and the Office for Administration o f Stool Lands. *%or example, line ministries and natural resource agencies, parliamentary committees, research institutions, local government authorities, extension officers, and farmer organizations. -112- (iii)Weak linkagesbetweentechnologygeneration(the responsibility ofthe Council for Scientific and Industrial Research)" and dissemination(the responsibility o f the extension system). (iv) A generally high rate of staff turnover, the result of-among others things-frequent institutionalrestructuring, which causes loss of institutionalmemory. (v) General lack of adequateresources. Table 5-12: InstitutionalIssuesand Impacts on LandDegradationlSLM Issue Impact Duplicationo f roles andresponsibilities among the Unclear direction for landutilization and institutions with a mandate for landmanagement and management utilization .. Difficulties indetermining responsibility/ Sometimes conflicting mandates among the accountability institutions that are authorizedto handle land management and utilization Absence o f an SLM "champion" .... Weak coordination among the institutions having a . Oftenincoherent and unharmonized policy mandate for landmanagement and utilization development Lack o f institutionalized mechanisms for institutional Reduced informationflow coordination for land management issues Inefficient or suboptimal allocation o fresources Lack o f institutional capacity for SLM Inadequate landuse planning, SLM mainstreaming, technicalbackup, implementation capacity, etc. Inadequate M&Eand enforcement C-4: Decentralization 51. The decentralization process adds complexity to the institutional framework. The decentralization process, which the government has been pursuing in the recent past, adds a new dimension to an already complex picture. Line ministries/departments are unevenly represented at the regional and district levels. For example, the EPA and the Land Commission are represented only at the regional level. There are Forest Offices at district level, but not in all districts. The Town and Country Planning Department-which i s responsible for, among other things, land use planning-is representedat the district level, butreports to the MinistryofLocalGovernment andnot to the MES.Withinthe District Assemblies-the primary legislative forums at the local level-the main environmental body is the District Environmental Management Committee (DEMC), responsible to develop plans for the environment. However, the mandate of the DEMCs often overlaps with that o f the Forest Service, particularly on forest-related issues. Consultation mechanisms for land resource users are limited. High turnover, frequent changes in the institutions' mandates, the complexity o f the institutional framework, and weak coordination only exacerbate the situation. Streamlining the functions of the various government institutions at many levels and ensuring local participationin decision-making processes are greatly needed. *'The Council for Scientific and Industrial Research (CSIR) reports to the Ministry o f Environment and includes: the Crop ResearchInstitute, the Soil ResearchInstitute, the Water Research Institute, the Forestry ResearchInstitute, the FoodResearchInstitute, the Animal Research Institute, the Savanna Research Institute, and the Atomic Research Institute. -113- Table 5-13: Decentralization Issues and Impacts on LandDegradatiodSLM ... Issue Impact Lineministries/departments areunevenlyrepresented .. Weak institutional framework for landmanagement Inconsistencybetweenlanduse at local level and . at regional and district level Complex vertical reporting system that planned at national level Overlaps inthe mandate o f some institutions Highturnover and frequent changes inthe institutions' mandates D. Incentive Barriers D-1:Tenure security 52. The existingtenure system does not provide adequate long-term security to resource users, and may reinforcethe tendency toward short-termhorizonsinland management decisions.Tenurial rules are infact generally unfavorable to primary users: (i) Stewardshipof the land: The ultimate stewardship o f the land is vested inthe chief (or in the state for public lands), not in the resource userhenant. The traditional authorities (stools/skins)-who hold the communal land in trust for the community-have absolute freedom to deal with or dispose o f the land. Investment choices have to be agreed upon with the owner o fthe land. Consequently, because farmers may fear eviction from the land, they may refrain from adopting long-term investments to improve land management. In addition, in sharecropping tenancy agreements, an increase in production i s usually more beneficial to the landlord than to the tenant. Therefore, tenants may lack the incentives to undertake investments to improve land management. Finally, land tenure arrangements limit the farmers' ability to use land as collateral for loans. This may limit their ability to access credit, as explainedbelow. (ii) Compulsory acquisitionof land:The provision by which the government has the power to acquire land once it i s in the public interest (Article 20 o f the Constitution) may reduce tenure security, and, as above, discourage resource users from sustaining long-term investments on their land for fear o f eviction or o f insufficient compensation for their investments. This power vested in the government has in fact often been exercised in a nontransparent and adverse manner. Kasanga et al. (2001), for instance, argues that state management o f land has generally benefited the government bureaucracy to the detriment o f the poor. Moreover, even though the law guarantees compensation for the compulsory acquisition o f private land, in several instances, land that the government seized was not utilized for the explicit purposes for which it was acquired, and owners did not receive prompt and adequate compensation (in particular, compensation for land improvement, i s not recognized), (iii)Oral agreements: A lot of the agricultural tenancies are based on oral agreements. Consequently, there are frequent disputes concerning the duration o f the tenancies, which in most cases lead to eviction of tenants from the farms they lease, especially when the original landlord i s deceased and the farm i s taken over. (iv) Inheritance system: The existing inheritance system may obstruct or not provide the adequate incentive for adopting sustainable land management technologies. Inpatrilineal systems (as in northern Ghana), land i s divided among the male heirs o f the family. This system o f inheritance often leads to fragmented gifts. As a result o f fragmentation, -114- contiguous plots may not be heldby different persons, but may be under different tenure.82 Thus, where soil conservation measures should, for technical reasons, extend over a whole area, it maybe difficult for all farmers concerned to adopt them. (v) Land boundaries: Unclear land boundaries, oral transactions, lack o f land titles, and a backlog o f land cases have all contributed to increase a sense o f tenure insecurity among resource users, thus reducing their incentive to long-term investments. D-2: Access to credit 53. Inadequate access to credit prevents farmers from sustaining the upfront costs associated with adoption of S L M technologies. Changes intechnology are often associatedwith highupfront costs and/or with returns deferred inthe long-term. Limitedaccess to credit inthe agriculture sector may limit farmers' capacity to bear the initial costs associatedwith adoption of a new technology. Infact, access to financial services and credit support from commercial banks i s very limitedinGhana's agriculture sector. Because of the highrisk associatedwith agriculture and the low level of investment collateral, few funds are available for lending to farmers. For example, in 2002 the percentage o f credit support from commercial banks to agriculture, forestry, and fisheries amounted to 2.1 percent, as opposed to 20.3 percent to the manufacture sector (MoFA 2003, inFA0 2005). The highinterest rates for the agriculture sector (worsened by inflation) further deter farmers from obtaining commercial bank loans. D-3: Access to markets andfiscal and trade barriers 54. Limited accessibility to and poorly functioning markets increase the transaction costs and discourage farmers from investing in and adopting S L M technologies. Increased land productivity does not necessarily represent an incentive for farmers to adopt new technologies if they don't have the means to control the price of their products. Moreover, rural roads needed for access to markets are either in very bad condition or nonexistent. In addition, inadequate storage facilities and insufficient agro- processing plants hinder agricultural production and have impeded adoption of measures to enhance soil productivity. 55, Fiscal and trade barriers and price subsidies-including those in developed countries-may act as disincentives to S L M by hampering agricultural and economic growth. Agricultural products suffer from having to compete with lower prices in other developing countries, countries that may enjoy agricultural subsidies. To lower cost of production, opportunistic and non sustainable practices are in fact often adopted. Box 5-5: Impactof Trade Liberalization on LandUseDecisions inGhana Since 1983, Ghana has introduced major structural reforms inits economy, including liberalizing its exchange rate and removing distortions in the prices o f agricultural commodities. However, trade liberalization reforms could potentially have a negative impact on soil productivity. Because o f traditional farming practices, farmers would likely react to an increase o f agricultural prices by expanding their cultivated land rather than intensifying crop production. In a study on the impact o f economy-wide reforms and land management decisions of poor farmers, Lopez (1997, inBarbier 2000) estimated that the overall impact o f trade liberalization on average causes a 2.5-4.4 percent decline inbiomass inwestern Ghana as a result o f the increased cultivated area. As inthe traditional bush- fallow system, the biomass serves as natural fertilizer; depletion of biomass i s likely to cause land degradation and loss o f soil productivity. 82This happens when the plot that a farmer was renting from one owner is dividedamong the heirs o f the owner. Contiguous plots could therefore be heldby one farmer, but be owned by different persons. -115- D-4:Economic returnofresources 56. Inappropriate pricing of resources may encourage overexploitation. If the market price of a natural resource i s below the economic value of the resource, overexploitation and depletion o f the resource may result. For instance, the market price of timber i s relatively low inGhana, and this provides an incentive for overexploitation of the resource. The prices of firewood and charcoal do not take into consideration the opportunity cost o f wood, making their pricing fall below the real cost and serving as an incentive for depletion of forest resources. Table 5-14: IncentiveIssues and Impacts on LandDegradatiodSLM Issue Impact Stewardship o f land is investedinthe chief or inthe Tenure insecurity, which reduces resource users' State. incentives for long-term investments on the land they Government has the right to compulsorily acquire use. land ifinthe public interest. Access to credit for sustaining the upfront costs . Compensation to resource users for expropriation o f associatedto the adoption o f a new technology may land is not always paid or paid ina timely manner, be more difficult. Ifcontiguous plots oflands areunderdifferenttenure ... .. and may not reflect land improvements. Land boundaries are unclear, transactions are oral, . systems, SWC measuresthat, for technical reasons, and landtitles do not exist. mustbe extendedbeyondone user's plotmay be Resource users cannot use land as collateral for difficult to be adopted. loans. Inpatrilineal inheritance systems, itmaybedifficult Inpatrilineal inheritance systems, contiguous plotsof for farmers to adopt measures that need to be lands may be under different tenure systems. extended over a whole area. Provision o f financial services and credit from . The ability o f farmers to access credit inthe commercial banks inthe agricultural sector are agricultural sector is limited, and therefore their limited. capacity to bear the initial costs associatedthe adoption o fa new technology is constrained. B Ruralroads are nonexistent or inbad condition. The ability o f farmers to benefit from potential Storage facilities are inadequate. improvements inlandproductivity derived from Agro-processing plants are insufficient. adoption o f SLM technologies is constricted. rn The market price o fnaturalresources is often below a An incentive to overexploit naturalresources exists. the real economic value o f the resource (e.g., timber, firewood, charcoal). E. Knowledge Barriers 57. Generally limited knowledge of the extent, impact, and costs of land degradation, as well as on the economic benefits of sustainable land management, impede a comprehensive approach toward the problem. (i) Lack of benchmarks and indicators:Overall, Ghana lacks any systematic benchmarks or indicators for assessing the rate, the extent, and the impact o f land degradation in various parts o f the country; the country also has no baseline information from which to monitor progress in addressing the problem. Moreover, most o f the available information i s outdated (assessment o f the extent of land degradation in the country refers mainly to studies undertakeninthe 1980s). (ii) Flow of information: Most of the information i s compartmentalized among various research institutions, ministries, and agencies, and the flow of information is very limited, -116- as data are often made available only against payment. At the local level, access to information i s virtually nonexistent. (iii)Focusofpresentresearch:Informationontheimpactoflanddegradationineconomic terms is relatively limited, and mainly involves on-site effects (loss of productivity). In general, research focused on the technological requirements for SLMrather than on what drives adoption of SLMand what are its constraints. Farmers' views are rarely captured in the present research, making it difficult to implement conclusions on the ground. The capacity o fthe CSIR centerss3mustbe strengthened. (iv) Spatial Data Information and Geographic Information Systems: Capacity and the use of Spatial Data Information(SDI) and Geographic Information Systems (GIS) for assessing landdegradation are still limited. 58. Decision makers lack critical information to underpin their decisions. Lack o f adequate information on the magnitude and costs of land degradation resulted in key policy makers who were generally unaware of or inattentive to the problem. Consequently, land degradation was not among the key development priorities of the country, sustainable land management elements were not adequately integrated into the Poverty Reduction Strategy, and the National Action Program to Combat Drought and Desertificationwas not implemented. 59. In addition, the lack of unified information on the technical, social, and economic requirements of SLM practices and on their applicability to diverse agro-ecological zones of the country limitsthe wide-scale promotion and replication of these practices. Information i s limited and unorganized on the specific characteristics and the technical requirements of SLM practices, including design, technical standards, management requirements, what works where (suitability to the different agro-ecological zones of the country), and so on. In addition, information on the contextual socioeconomic factors that determine the sustainability o f SLM practicesg4, technology gaps, and conditions for their replication i s scant, and the perspective o f the resource users i s rarely captured. Without such critical information, promotion and replicationo f these practices are problematic. 83 Crop Research Institute, Soil Research Institute, Water Research Institute, Forestry Research Institute, Food ResearchInstitute, AnimalResearchInstitute, Savanna ResearchInstitute, and Atomic ResearchInstitute. 84E.g., social acceptability, and implications interms o f costs andlabor for the targetedbeneficiaries. -117- Table 5-15: Benefitsof Low-input Technologiesin Mitigating the Effects of Land Degradation Issue Impact Benchmarks or indicators for assessingthe rate, Decision makers lack critical informationto proper extent, and impact o f landdegradation are lacking. Informationon the rate, extent, impact, and costs o f landuse planning or implementation o f SLM. Awareness o fthe problemo f land degradation and land degradation is limited, outdated, or compartmentalized. the benefits o f SLM is lacking andor attention is The flow ofinformationis poor, andthe capacity o f limited. Research conclusions are oftentoo theoretical and CSIR centers weak. Research focuses on technological issues rather than hardly implementable. to socioeconomic factors influencing the adoption o f SLM. Use o f SDI and GIS for assessingland degradation is limited. Informationon the specific characteristics and An incapacity to promote the replication o f SLM technical requirements o f SLM practices i s limited technologies on a wider scale exists. and unorganized. Informationon the contextual socioeconomic factors that determine the sustainability and replicability o f SLM practices is poor. The perspective ofresource users is rarely captured. ProposedSolution 60. The proposed actions aim at developing a sustainable framework for sustainable landflandscape management in the long run. The analysis of the root or underlying causes of land degradation highlights the existence of a number of barriers and bottlenecks that prevent long-term investments in land management and indirectly contribute to land degradation. This section identifies a number o f concrete actions that can contribute to removing these barriers. 61. Three sets of actions are proposed:(a) actions aimed at creating an enabling environment for sustainable land management (policy and regulatory, and institutional capacity), (b) actions to support on- the-ground activities scaling up sustainable land management practices (infrastructures, technologies, and output-based investments), and (c) actions for supporting policy and investment decisions through SLM knowledge management (knowledge management, and monitoring and evaluation). The third set of actions i s to provide an analyticalback-up for the first two sets of actions. 62. The long-term vision behind the proposed actions is the development of a sustainable framework for landllandscape management, ultimately helping Ghana attain and maintain the economic growth necessary to reach middle-income country status. A sustainable framework for landlandscape management i s defined as one in which: land degradation i s recognized as a key development priority; a policy and regulatory framework conducive to SLM and effective SLM governance i s put in place; decision making, adoption of technology, and investmentdecision processes are underpinned by strong, evidence-based analysis; and an effective SLM planning system, in which SLMinterventions areharmonized andcoordinated, isinplace. 63. The proposed set of actions can be implemented through an integrated multisectoral programmatic approach for SLM (a sector-wide approach-type). An integrated multisector programmatic approach (as opposed to a project-based approach) would be defined as an approach in which investments and interventions are aligned against a commonly agreed set o f objectives and priorities, with a common monitoring and evaluation system, and supported by strong operational -118- linkages with knowledge management and a public expenditure framework. Since land degradation i s a cross-sectoral issue, the program should integrate investments o f different sectors. 64. The proposed actions are summarized in a matrix (section 5-7). The matrix organizes the proposed actions in four categories: (a) policy and regulatory, (b) institutional capacity building, (c) infrastructures, technologies, and output-based investments, and (d) knowledge management and M&E, and along three time horizons: short (until 2009), medium (2009-2015), and long term (2015-2025). In most cases, the actions proposed for the mediumterm are the continuation of those proposed for the short term. It would be unrealistic to assume that the proposed actions would have a significant impact if not implementedfor a significant time horizon. Actions in the medium term will therefore mainly review, correct, and continue implementing the actions proposed for the short term. Recommending specific actions for the long-term, Le., 10 to 20 years from now, i s more difficult. In this case, the desired outcomes described inthe matrix serve as a guide to provide direction for policy and investment choices inthe future. A. Actions Aimedat Creatingan EnablingEnvironment for SLM A-1:Policy andregulatory 65. Integrate SLM elements into and ensure the "sustainability test" of a new policy, strategy, program, expenditure, and planning framework-at national and decentralized levels. One o f the major policy constraints identified is the still-weak integration o f land degradation considerations and sustainable land management elements into key development and sectoral policies, strategies, and action plans.8sIn addition, crucial policy gaps have been identified, including the lack o f a strategic plan to implement the land policy, and of a land use policy and action plan. It is therefore recommended that SLMconsideration be more clearly integrated into the definition of a new policy, strategy, program, and expenditure fiamework. 66. Entry points. The ongoing processes of revision o f the Food and Agriculture Sector Development Policy (FASDEP), design o f an Agriculture Sector-Wide Approach (AgSWAp) and of an Agricultural Development Policy Operation (Ag DPO), and formulation o f the Agriculture Land Management Policy and of a National Land Use Plan represent concrete and immediate entry points for SLMmainstreaming. However, inthe mediumterm, thisprocessshouldbeextendedprogressively to any national policy, strategy, or action plan (startingfrom the next GPRS). 67. Tools to support SLM mainstreamingmay include the mandatory set-up o f special intersectoral committees for SLMduringthe preparatory phases of any policy, and the systematic and prior application of the already-existing "sustainability test" (a strategic environmental assessment that EPA promotes duringthe designhevision ofpolicies that have apotentially negative impact on the environment). Further analytical and stock-taking work can also support SLMmainstreaming. 68. Revise and harmonize existing laws and regulations, as well as implementation of an effective land certification system, for an effective and efficient land administration and tenure system. As observed above, the existingregulatory framework contributes to increased transaction costs and reduced tenure security, thus ultimately lowering farmers' incentives for long-term investments in land management. Revision and harmonization of the existing land policies and laws would therefore be advisable. The Government of Ghana has recently embarked on an ambitious land administration reform program (Land Administration Project-LAP; see Appendix 5-10 for more details), that seeks, among other things, to harmonize land policies and a legislative framework with traditional law, and to establish an efficient and transparent system for land registration and titling. Although the LAP has only recently started and it i s therefore too early to assess the impact and the results so far achieved, it could 85The country's Food and Agriculture Sector Development Policy (FASDEP), the country's Agricultural Services Sub-sector Investment Project (AgSSIP), and the Growth and Poverty Reduction Strategy are key examples. -119- nonethelessrepresent the platform for revisingand harmonizing the existing laws and regulations, and for implementing a fair landregistrationand titling system.Periodic revision of the programmay enhance the adoption o f corrective measures as required, if needed. However, due attention to equity concerns i s required. 69. Revise and harmonize the existing incentive system for SLM. The adoption or nonadoptionof sustainable land management technologies and practices i s influencedby many factors that go beyond the mere profitability of the technology. These factors include, among others, tenure security, access to credit, access to markets, and price o f resource. Therefore, to be successful, policy and regulatory interventions in the land sector must be accompanied by specific interventions aimed at improving tenure security, facilitating access to credit, supporting upfi-ont investments, and facilitating farmers' access to markets. 70. Interventions to improve the incentive system for S L M may include: (a) designing and facilitating private (and possibly public) payments for environmental services schemes for services providedby SLMadoption (includingwater regulation and quality control, carbon sequestration, etc.), (b) providing matching grants to land users switching to SLMinorder to facilitate adoption (to overcome the barrier o f up-front investment requirements), (c) fostering provision of credit for investments in SLM through existing and new financial service providers, (d) improving farm roads and water transport to market, and (e) improving storage facilities. Box 5-6: Payment for Environmental Services (PES) and Sustainable Land Management The Payments for Environmental Services (PES) approach is an innovative market-based approach to conservation financing. The approach, in essence, seeks to link those who benefit from environmental services ("the buyers") with those who contribute to generating these services ("the sellers"). I t creates a mechanism whereby those who derive benefits pay for the environmental services, while those who help generate the services receive compensation for providing them. The key point o f note i s that the service(s) can be identifiedand there is a demand, thus a value can be placed on these services in order to effect a transaction. Environmental services encompass a variety o f `goods' or benefits that the ecosystem generates, such as carbon sequestration by trees, water related services such as maintenance o f hydrological cycles and prevention o f floods, water quality improvements, and maintenance o f biodiversity, with a variety o f benefits. Unfortunately, environmental services are not always clearly or easily identified `products', and traditional markets may not be the appropriate mechanisms to bring together the `buyers' and `sellers' o f the services. The PES approach is attractive inthat (i) it generatesnew financing, which would not otherwise be available for conservation; (ii) it is likely to be sustainable, as it depends on the mutual self-interest of service users and providers and not on the whims o f government or donor finding; (iii) it is likely to be efficient, in that it conserves services whose benefits exceed the cost o fproviding them. This approachhas increasingly used inLatinAmerica inrecent years and is being introduced ina variety of forms in Africa. An interesting example o f how the PES approach can be used to promote sustainable land management (SLM) is provided by the regional the World Bank/GEF `Integrated Silvopastoral Approach to Ecosystem Management' project inColombia, Nicaragua, Costa Rica. This project seeks to target the barriers that impede the widespread adoption of improved land use systems in order to achieve biodiversity and agricultural productivity benefits, through a PES model. The project uses a PES modality to provide incentives to small holder farmers to adopt SLM. This approach holds great promise for many countries in Africa. Two recently submitted project concepts for GEF funding seek, among other objectives, to test the PES approach to replace the traditional grant based systems for supporting agricultural productivity and adoption o f SLM technologies inGhana andNigeria. -120- Table 5-16: Policyand Regulatory Issues, Opportunities and ProposedActions Issue Opportunity Proposedactions Landdegradation and SLM Revision o fthe FASDEP . Integrate S L M elements into new elements weakly integratedinto Development o fthe AgSWAp policy, strategy program, the key development and and design o fthe A g DPO expenditure, andplanning sectoral policies, strategies, and Formulation o f the Agriculture framework. actionplans LandManagement Policy Ensure the "sustainability test" o f Formulation o f a National Land new policy strategy, program, Use Plan and expenditure andplanning Revision o fNEAP framework. GPRS IV (in2008) Co-existence o f statuary and Ongoing landadministration Reviseand harmonize the traditional system reformprogram(LAP), which existing laws and regulations, Multitudeoflaws and aims at revisingand harmonizing and implementation o f effective regulations, often contradictory existing landpolicy and land certification system, though or outdated regulatory framework for land the existing LAP. Unclear boundaries and administration inadequate land administration system Inadequate security o f land Agriculture financing, Revise andharmonize the tenure agriculture marketing, and land existing incentive systemfor Inadequate access to credit administration considered among SLM. Poorly functioning markets the GPRS I1strategies .. Provide/develop incentives for Inadequate pricing o fnatural Improving the landtitling, SLM adoption: PES schemes for resources registration, and information services providedby S L M systemone of LAP'Sactivities adoption, matching grants and credit provision for SLM, farm roaddwater transports, storage - facilities, etc. A-2: Institutional Capacity 71. Streamline the functions of the public land agencies, and develop and strengthen cross- sectoral coordination mechanisms for S L M at all levels. One o f the most critical bottlenecks to the successful addressing o f land degradation i s the duplication of roles and responsibilities, and the weak coordination among institutions with a mandate for land management and utilization. On the one hand i s the need to streamline the functions of existing land management institutions; on the other hand is the necessity to develop and strengthen cross-sectoral coordination mechanisms among those institutions to coordinate and facilitate national actions insupport of SLM. 72. Streamline the functions of the public land agencies: One of the objectives of the LAP is to review the functions o f the public land agenciess6and propose their reorganization. The recent proposal for mergingthese six public land agencies into one corporate entity responds to this need, and i s worth pursuing. 73. Develop and strengthen cross-sectoral coordination mechanisms for S L M at all levels: The proposal i s to set up two committees at the national level specifically for policy dialogue and enhancing coordination among the various institutions' efforts toward sustainable land management: (a) a Steering Committee incharge of providing strategic guidance (at the cabinet or ministers' level to give a very high 86The Land Commission, the Survey Department, the Land Valuation Board, the Title Registry, the Deeds Registry, and the Office for Administration o f Stool Lands. -121- profile to the issue o f landdegradation and sustainable landmanagement), and (b) a Technical Committee to provide technical support and be responsible for the coordination, implementation, and follow-up o f the SLM multisector program (e.g., planning, implementation, monitoring, reporting and evaluation, etc.). These committees should involve a large number o f sectoral and nonsectoral institutions, including, among others, the Ministry of Finance and the National Planning Commission. The recent initiative o f the Ministry of Finance to set up a National Committee for TerrAfrica8' can provide the basis for the Technical Committee, but clear terms o f reference must be developed and agreed upon. This structure should be replicated (and adapted, if needed) at the district or watershed level. Mechanisms for vertical coordination and reporting should also be putinplace. 74. Identify a championfor SLM: A national champion is neededto take the lead inpromoting and implementing the SLM agenda and to bring together decision makers, land users, experts, and stakeholders. 75. Create SLM partnershipswith developmentpartners and civil society. Similarly, analogous coordination mechanisms and partnerships for SLM should be engendered among the development partners and civil society engaged in sustainable land management activities; mechanisms for dialogue with the Steering and Technical Committees should also be formulated. Inthis regard, the Environment and Natural Resource Management (ENRM) Sector Group (the group of donors that coordinates development partner support to the environment and natural resource sector in Ghana) may offer a platform. However, additional efforts to define and agree on a joint work program for SLM (i.e., a common set of objectives andpossible outcomes and indicators) shouldbe pursued further. For example, TerrAfiica's multipartner initiative can support buildingand strengthening the partnership by channeling knowledge and support from TerrAfiica partners and promoting or supporting the development o f joint work programming or collaborative assistance strategies. The benefits of such a framework would include a more harmonized and coordinated approach to dealing with land degradation at the policy, strategy, and program levels; benefits would be in terms of efficiency (duplication of efforts would be avoided, and resourceswould be optimized), and effectiveness (economies of scale and comparative advantages). 76. Strengthenthe technicalcapacity for SLM at all levels.Lack of institutional capacity has been identified as one of the main constraints in the country; direct consequences are an impaired general awareness, insufficient capacity to enforce policies and regulation, and an inability to implement program and projects. Significant efforts and investments in capacity building for SLM are therefore recommended. It should primarily focus on the following areas: cross-sectoral (spatial) planning, participatory planning, policy development and the incentive implications in policies and public expenditure strategies, design of SLM strategies and land use plans, integrated watershed and land management (IWLM), technical requirements for SLM, EIA, GIS use, and monitoring and evaluation. 77. Capacity-building programs may include training, workshops, expert services, and goods (publications/training materials, equipment, software, etc.). These programs should target all levels, from national to local and communal, and possibly (and progressively) be extended to parliamentary committees, civil society, community-based organizations (CBOs), farmer associations, and the private sector. Critical to the successful scale-up o f SLM are strengthening the links between the generation of research and technology and dissemination and extension, and the training extension officers in SLM technologies. Inthe latter case, developing guidelines for SLMwatershed planning and requirements may further this end. TenAfrica i s a multipartner initiative to support the SLM scale-up in Sub-Saharan Africa. Ghana is a member of its Executive Committee. -122- Table 5-17: InstitutionalCapacity Issues, Opportunities, andProposedActions Issue Opportunity Proposedaction Duplicationo froles and I TerrAfrica multipartner platform 1 Develop and strengthen cross- responsibilities among the TerrAfricaNational Steering sectoral coordination institutions witha mandate for Committee mechanisms for SLM at all landmanagement and utilization 1 NationalDesertification levels. Weak coordination among the Committee I Develop S L M partnerships with institutions with a mandate for 1 ENRMSector Group development partners and civil landmanagement andutilization 1 Provision for establishing an society inline with TerrAfrica Lack o f institutional capacity for "environmental desk" ineach principles. SLM line ministry I Streamline the functions o f I One of LAP'Sactivities includes agencies inthe land sector Overall limited capacity to restructuring ofpublic sector (through, among other actions, enforce policies andregulations landagencies. continuing implementing the LAP). I Identify a SLM champion. Strengthen technical capacity for SLM at all levels. B. Actions Aimedat Supporting On-the-ground Activities to Scaleup SLM Practices 78. Develop and support on-the-groundSLMinvestments.This programincludes a set of on-the- ground investments for SLM activities with an embedded scale-up strategy. There are two typologies o f on-the-ground investment that couldbepotentially supported: (1) Scaling up of existing SLM technologies/practices: As described inTable 5-9 and in section 5-3, a number o f locally specific, low-tech sustainable options in Ghana have shown benefits in both reduction o f soil loss and improvement in crop yields. Many o f these technologies are applied on a limited scale. On-the-ground investment could specifically focus on spreading and scaling up these technologies. Investment support could focus on research and development networking, knowledge dissemination, and rural finance. (2) IncorporatingSLMapproachesinthe production system:On-the-ground investments should address intensification, diversification, and value-adding by incorporating SLM approaches inthe production systems of existing farming systems. These investments should also facilitate and support gradual exit strategies from unsustainable farming systems. Investment support should include a mix of different investments, ranging from those facilitating access to credit, to physical infrastructures, training, research and development, and extension services. 79. A number of actions canprepare the ground and support the scaleup of SLMinvestments, including: (9 Identificationof lessons and best practices and scale-up strategy in ongoing projects. A number of ongoing activities directly or indirectly dealing with landdegradation already exist. Their implementation should allow us to learn lessons and identify best practices that can be scaled up. Specific focus would be on identifying the requirements and geographic suitability o f SLM best practices that can be used to update existing technology packages. To this end, a scale-up strategy may be embeddedinthe design o f SLMprojects. (ii)CapacitybuildingforSLMimplementers(farmersandfarmerassociations,CBOs,etc.). Capacity building may include: (a) development o f skills to promote farmer-driven innovation and adoption, including the provision of a set of SLM technologies and practices (along with those based on traditional best practices and knowledge) that farmers -123- can test and adapt, (b) development of the capacity to explore the multiple monetary benefits SLM activities can provide, such as through CDM, payments for ecosystem services, and conservation management, (c) support for increased community awareness o f land degradation and desertification issues and of cost-effective measures to mitigate them, (d) training in participatory methodologies that facilitate community-based management approaches, (e) strengthening of the farmer/producer organizations (including youth and women), and (f) field trips, farmer-to-farmer exchange events, and workshops for dissemination andreplication of SLMbest practices, technologies, and lessonslearned. (iii)Capacitybuildingfor SLMservice providers(extension staffandlocalgovernment). Included in this action are: (a) SLM training in participatory integrated approaches to natural resource management, with a modified curriculum that includes socioeconomic and environmental components relatedto SLM, (b) capacity buildingof extensionists and other advisory service providers to build the necessary skills for helping farmers in production diversification, processing, marketing, and marketing organization as related to SLM, (c) support for networking among service providers to increase awareness and adoption o f SLMpractices and marketing organization, and (d) development of SLM curriculum for farmer field schools. (iv) Identify and develop financial mechanisms to support SLM scale-up, strengthen financial service providers, and develop incentives to involve the private sector. Mechanisms for improving access to financial resources for SLM to individual farmers or community-based organizations may include: (a) microcredit programs and the development of appropriate financial services products (savings and credit) that can facilitate the adoption of SLM, (b) matching grants to land users who switch to SLM, (c) payment for environmental service schemes for services provided by SLM adoption (including water regulation and quality control, carbon sequestration, etc.). Financial service providers should be strengthenedto extend their reach to rural areas, and should be encouraged and facilitated in developing financial service products that can ease the adoption o f SLM. Incentives for promoting progressive involvement o f the private sector should be considered. 80. Specific examples of on-the-ground activities that could be supported include, among others: (a) technology transfer, and technical and financial support to develop and implement strategies for promoting the development and use of machinery, tools, and equipment for SLM, (b) experimentation and dissemination of sustainable agriculture, (c) adoptiodexpansion o f soil and water conservation measures to protect watersheds, including reforestation o f riparian or other fragile areas and erosion control in rural roads, (d) SLM activities that promote crop diversity, preserve breeding grounds, and provide buffers for changing habitats in protected areas, (e) SLM activities that integrate climate adaptation components, such as those that (i) support forest and vegetative cover restoration to reduce siltation and the associatedwater flow problems, or (ii) improve community resilience to climate change through the development o fnon-climate-proofrural livelihoods." 81. A wide-ranging set of actions must complement and support the above actions, ones that go beyond direct landmanagement and are integratedwith measures that promote rural development. Land degradation i s a multidimensional issue. It i s unrealistic to assume that investments in SLM practices and technologies alone will address land degradation. To be successful, investments in sustainable land management must be accompanied by supportive actions, including, for instance (a) appropriate interventions aimedat enhancing access to markets and reducingrisks to investments inSLM, *'These activities may include, for example, improved water management by water harvesting, conservation and small-scale irrigation, or diversification o f crops (e.g., drought resistant crops) and livestock to accommodate the incidence o f droughts. -124- for example, infrastructures and facilities (farm roads and water transports to markets, storage facilities, rural energy programs, small-scale irrigation systems, etc.), (b) diversification of activities that generate ruralincome, and (c) increased involvement o f local communities inNRM/SLM. Table 5-18: TechnologicaVInvestmentsIssues,Opportunities, andProposedActions Issue Opportunity Proposed action Unsustainable rn Existing S L M practices in Update, prioritize, and cost the activities farming practices the country included inthe NAP. Lack o f Endorsed NAP Continue the ongoing operations, institutionalized a Ongoing S L M operations investments, and identification o f lessons mechanisms to scale andbest practices. up SLM Buildcapacity for SLM implementersand service providers. Limiteddomestic and rn Agriculture financing and Develop mechanism to improve access international financial agriculture marketing to financial resources for S L M to resources allocated considered among the individual farmers and CBOs (e.g., for SLM GPRS I1strategies microcredit, matching grants, PES, etc.). Inadequate access to Strengthen financial service providers. credit Promote incentives for private sector Limited involvement involvement. o fprivate sector C. Actions aiming at Supporting Policy and InvestmentDecisionsthrough SLMKnowledge Management 82. Strengthenkey researchinstitutionsand statisticalservices, and encouragethe development of and support to applied research on land degradation and SLM. This will strengthen both decision-making and the links between research, extension, and farmers. Limited or unorganized information on the extent, impact, and cost of land degradation has resulted, on the one hand, in policy makers who give limited attention to the problem, and, on the other hand, in policy and investment decisions that are based on poor analysis. An important proposal, therefore, i s to strengthen key research institutions, divisions, and statistical services dealing with land issues (e.g., Soil, Crop, Water, and Savanna ResearchInstitutes). One consideration i s the possible restructuring of the existing CSIR centers into a national institute for research. An additional recommendation i s to support the development of pragmatic applied research on land degradation and sustainable land management in order to enhance decision making and the links between research, extension, and farmers. 83. Future applied research could include, for instance: the socioeconomic costs of land degradation and the benefits of SLM; the impact of land degradation in terms o f conflicts; land management and its impact on and adaptation to climate change; and SLM technologies. The latter comprise, among others, inventory and characterization of "what works where," what are the factors influencing the acceptability, replicability, and sustainability of good practices and successful replication, and the upscaling of SLMpractices beyond existingdemonstration areas and technology gaps. -125- 84. Build, harmonize, and improve baseline information, statistical data, and information systems specific to land degradation, and develop info- and data-sharing mechanisms. Ingeneral, Ghana lacks any systematic benchmark or indicators on land degradation, which undermines the country's capacity to properly planning and monitor progress toward addressing land degradation. Actions are therefore recommended to build, harmonize, and improve the baseline information and data (including Spatial Data Information and Geographic Information System) specific to land degradation. These actions will include data collection, collation, analysis, and dissemination o f results, and the development and testing o f a harmonized set o f specific benchmarks and progress indicators. Data buildingand collation on the extent and geographical distribution o f land degradation is a priority. To be effective, the development o f a proper mechanism o f data and information sharing should accompany the development o f such an information system. These activities constitute the baseline activities for the development of a monitoring system for land degradation. 85. Establish and implement a comprehensive and integrated mechanism for monitoring natural resources and land degradation processes. Based on the activities described above, it i s recommended that a comprehensive mechanism for monitoring natural resources and land degradation processes be established and implemented. This would include, among others, the establishment of M&E action plans, M&E technical committees, feedback loop mechanisms, and training. The established M&E system would support the proposed multisector investment program for SLM. Table 5-19: Knowledge ManagementIssues, Opportunities, and ProposedActions Issue Opportunity Proposedaction Limited or unorganized rn Strengthen keyresearch information on the extent, institutions and statistical impact, and cost o f land services (reform o f existing degradation CSIRcenters to be considered). Limitedandunorganized rn Develop and support applied information on the specific research on land characteristics and requirements degradatiodSLM. o f SLM practices and their suitability to different AEZs Lack o fbaseline information, I MES has developed a set o f I Build, harmonize, andimprove systematic benchmarks, or indicators to monitor sustainable baseline information, statistical indicators to assess land development data, and information systems degradation and to monitor (including SDI and GIs) specific progress inaddressing the to land degradation. problem I Establish and implement a Available information either comprehensive and integrated outdated or compartmentalized mechanismfor M&E. Flow o f information very limited I Develop info and data-sharing Use o f SDI and GIS for assessing mechanisms. land degradation still limited ImplementationMechanismsandShort-termFollow-upActions 86. Consistent with new architecture of development assistance in Ghana, characterized by a shift towards sector-wide programs and budgetary support, a more programmatic and multisectoral approach to address land degradation and promote sustainable 1andAandscape management is -126- recommended. A programmatic approach (as opposed to a project-based approach) would allow the alignment and harmonization o f current and future SLMinterventionsalong a commonly agreedupon set o f objectives and priorities and with a common monitoring and evaluation system, thus increasing the impact of interventions and achieving greater economies o f scale. SLM interventions would include interventions in different landscapes and land uses (e.g., agricultural and nonagricultural land, forests, reserves, corridors, and mines), and would integrate interventionsindifferent sectors (e.g., infrastructures, financial services, and private sector development). 87. Giventhe cross-cutting, multisectoralnature of land degradation, the mainimplementation instrumentsthroughwhich the above-proposed set of actions canbedelivered couldinclude: The Natural Resource and Environmental Governance Program (NREGP)-which can promote sectoral and cross-sectoral policy reforms that contribute to address land degradation and promote sustainable use of land resources, particularly in the forestry and miningsectors. The ongoing Food and Agriculture Budget Support (FABS) and the Agricultural Development Policy Operation (Ag DP0)-which can support reforms and interventions that would contribute to improve soil productivity and promote sustainable management of landresources inagricultural lands. The ongoing Land Administration Project (LAP)-which would deal with the land administration, tenure, and legislative aspects of land management, and with some institutionalreforms. The GEF Strategic Investment Program for Sustainable Land Management in Sub- Saharan Africa (SIP)-which will provide catalytic and complementary resources to support strategic interventions to strengthen the enabling environment for SLM(i.e. address policy, institutional and incentive barriers to SLM adoption), and as well as to promote on- the-ground activities to scale-up SLMpractices. The Ghana Environmental Management Project (GEMPFwhich will specifically focus on desertificationissuesinthe Northern Regions of the country. 88. Implementation of some identified interventions could receive support from the creation o f a basket fund or from the Desertification Fund (established in the framework o f the NAP), whenever replenished. 89. Improved donor alignment and coordination through the proposed development o f cross- sectoral coordination mechanisms and partnerships for SLM would also help optimize the allocation and use of already-existing domestic and internationalfinancial resources. Support for this coordination could come through the TerrAfrica platform. 90. TerrAfrica may support the implementation of the proposed recommendations by, among other things: helpingto buildand strengthen SLMpartnerships (e.g., channeling support from TerrAfrica partners, promoting or supporting the development of joint work programming, or collaborative assistance strategies); increasing and leveraging support for identified interventions andor implementation instruments; supporting and disseminating targeted knowledge (methodologies, best practices, etc.) through regional networks and toolkits; technically supporting the integration o f SLM elements incountry investments; and coordinating and supporting the advisory dialogue on SLM. 91. To develop a programmatic approach to address land degradation and promote SLM, the following short-term actions are considered critical: (1) Identify and appoint an S L M champion and establish a functioning S L M Committee. -127- (2) Develop a multisectoralprogrammatic framework and actionplan for SLM (i.e. CSIF -CountrySLMInvestmentFramework). This frameworkandactionplanwouldhelpthe government to identify, select, prioritize, cost and provide a timeframe for interventions and investments to promote SLM, and to define the most appropriate and harmonize the implementation and financial modalities to scale-up SLM. The formulation o f this programmatic framework could be supported by an analysis o f the levels, distribution, trend, sources, efficiency and effectiveness o f public expenditure in land management acrossthe various ministries andinstitutions responsible for landmanagement inGhana. -128- I 3 rcr 3 I 0) a & a Au D 0 ;A m I m 4 I e, 9 0 td 20 z I 3 I 6 Urban Environment Introduction A. Why Focus onthe UrbanEnvironment? 1. Slum dwellers worse off than their rural relatives.Ithas been a general assumption that urban populations are healthier, more literate, and more prosperous than rural populations. UN-HABITAT'S State o f the World Cities Report 2006/7 shows that the urban poor are more likely to die earlier, experience more hunger and disease, attain less education, and have fewer chances o f employment than those urban residents who do not reside ina slum. There are often two cities within one city-one part of the urban population that has all the benefits o f urban living, and the other part, the slums and squatter settlements where the poor often live under worse conditions than their rural relatives. 2. Sub-Saharan African cities among the ones worst off. In many Sub-Saharan cities, children living inslums are more likely to die from water-borne andrespiratoryillness thanrural children. Women living in slums are also more likely to contract HIV/AIDS than their rural counterparts. The slum population inmany Sub-Saharancities accounts for more than 70 percent o f the urbanpopulation. Annual slum and urban growth rates are the highest in the world in these cities, 4.53 and 4.58 percent, respectively-nearly twice those figures of Southern Asia. The UN-HABITAT report expects that 95 percent o f the world's urban growth inthe next two decades will be absorbed by cities of the developing world, which are least equipped to deal with rapid urbanization. Asia and Africa will continue to dominate global urban growth through 2030. 3. Slum formation can be prevented. The UN-HABITAT report shows that the most deprived slums, in terms of access to basic services and adequate shelter, are to be found in Sub-SaharanAfrica where 51 percent o f the slum population lacks two or more o f the following: access to water, access to sanitation, durable housing, and sufficient living area. The report notes that countries need not achieve significant milestones in economic growth before they tackle growing slum populations. Countries like Egypt, Thailand, and Tunisia have not only managedto reduce slumgrowth inthe last 15 years, buthave made considerable investments in improving slums. Some low- or middle-income countries around the world have managed to prevent slum formation by anticipating and planning for growing urban populations: they have expanded economic and employment opportunities for the urbanpoor. Thus, with the right policies and practices, it i s possible to prevent slum formation. B. Ghanaisbecomingmoreurbanized 0 Ghana is still a predominately rural population. Ghana's population is still predominately rural (EPA, 2005), but this is rapidly changing. In 1960, only 100 localities had a population of 5,000 or more, and these constituted 23.4 percent of the total population. In 2000, the share of the population living in urban areas had increased to 43 percent of the population. Ghana's total population almost tripled during the same period. The urban population is skewed toward the south, and Accra has 17 percent of the total population. As the rate of urbanization increases (4.5 percent, similar to the average growth rate for Sub-Saharan countries) compared with the overall population growth (2.7 percent), the highrural-to-urbandriftbecomesevident. 4. The density o f the average national populationrose from 28 people per lan2to 77 people per h2 in2000. While the populationdensities for the rural NorthernandUpper West regions increased from 17 and 24 in 1984 to 21 and 31 in 2000, respectively, that of the Greater Accra Region escalated from 441 persons per km2in 1984 to 897 in 2000, more than 103.3 percent. These figures clearly illustrate the enormous changes taking places insome areas, particularly the Accra area. - 135 - C. Environmentaland HealthProblemfrom Urbanization 5., Environmental problems associated with rapid urbanization. The rapid urbanization puts an enormous pressure on natural resources and infrastructure like water supply, sanitation, waste management, transportation, and housing; if these services are not adequately provided, the negative effect on people's lives i s serious. The environmental problems associated with urban overpopulation in Ghana are those that have direct bearingonhumanhealth, suchas water supply, basic sanitation, and disposal of waste; shortage of essential facilities; and disregardof approved land use allocations. Other problems are overcrowding, andpoor andinadequatetransportation. 6. The most commonly preventable health problems and treatable diseases in urban areas are diarrhea, malaria, malnutrition, cholera, respiratory infection, and intestinal and urinal worms. Important underlyingcauses of highmorbidity include poor environmental sanitation, lack of good drinking water, lack of access to basic health care, low levels of education, negative health-seeking behavior among vulnerable groups, and poverty. 7. Improved infant mortality rate but no significantchanges inthe morbidity pattern. Over the years, the death rate has declined because of improvement inpublic health, sanitation, medical facilities, education, and modernization (EPA 2005). The infant mortality rate went from more than 100 per 1,000 in the 1970s, to 66 in 1993. This declining mortality level is also reflected in the expectation of life at birth,which increased from 45 years in 1960to 58 years in 1993. 8. However, according to the EPA (2005), the morbidity pattern has not changed significantly. The pattern has shifted somewhat over the past two decades toward more "modern" diseases like HIV/AIDS and diabetes, while retaining most of the "traditional" diseases. However, the incidences of guinea worm and measleshave dropped considerably. About 70 percent of the morbidity can still be attributed directly to the environment, the lack of proper water, and means of sanitation; the population seems to be afflicted largely with the same diseases, for example, malaria, upper respiratory infections, and water-borne diseases. 5. Main diseases. Malaria i s behind most outpatient and hospital admissions in health facilities across the country. Malaria patients are about 43 percent of all outpatients and around 33 percent o f all admissions; it accounts for 18 percent o f all deaths. Cholera i s endemic to the coastal regions, and the Greater Accra and Central regions are the most affected; outbreaks occur at the peak o f the rainy and dry seasons. The incidence of guinea worm i s linkedto the availability o f safe water, and i s found mostly in the Northern, Volta, and Brong Ahafo regions. A basic, underlying cause of the persistence o f these diseases i s the widespread prevalence of poor sanitary conditions, unhygienic personal habits, poor nutrition, poverty, inadequate housing, and lack o f access to potable water. Studies indicate that the prevalence o f many o f the diseases inurban slums i s from bad living conditions rather than income levels. For instance, municipal supplies o f safe drinking water rarely penetrate slums. Children from the highest income groups in slums have higher rates of diarrhea than children in the poorest rural families because they are exposedto contaminated water and food. 9. Impact of urbanization on housing infrastructure. The adverse impact of rapid urbanization has also exacerbatedthe incidence of unplanned changes inland use inthe larger cities, especially Accra and Kumasi. Typical examples are the rapid conversion of agricultural lands for urban development, and excessive urban sprawl with its associatedproblems o f inefficient use of land. The inability of the housing delivery system to meet demand over the years has created a strain on the existing housing stock and infiastructure, especially inurban areas. Indeed, the housing of some urban inhabitants is often restricted to substandardstructuresandunsanitaryenvironmentsinsquatterand slum communities. 10. Impact of urbanhatiordindustrialhation on air quality. According to the EPA (2005), increased urbanization and industrialization in areas like Accra, Tema, Kumasi, and Sekondi-Takoradi has caused concern for the air quality. The main reasons for deteriorating air quality are ineffici,entuse of -136- fuels, poorly planned modes of transport, poorly maintained vehicles, inefficient cook stoves and fireplaces, and the primitive condition of industrial kilns and stoves. Along the main roads in Accra, Tema, and Kumasi where traffic i s high, concentrations of particulate matter, sulfur dioxide, and sometimes lead are high.An assessment o f roadside air quality in2003 indicatedthat people living along roads experience extreme pollution. InTema, the mainpollution sources are the industry. 11. The main factor behind increased air pollutionhas been the import of old, overused vehicles. In the past this import o f second-hand vehicles was restricted. But relaxed regulations have increased both the number of these vehicles and pollution. A growing vehicle fleet and the use of old vehicles will continue to deteriorate the air quality. However, Ghana did phase out the production and use o f leaded fuel in2004. 12. Particulate matter pollution. Land preparation for large-scale housing schemes and road construction are major sources of particulate matter pollution (EPA, 2005). Particulate matter (smoke and soot) causes upper respiratory problems. Chest diseases are now widespread, prevalent in construction, mining, and any areas where the air is polluted. Thus, particulate matter pollution seems to be a larger problem in areas other than rural. We will not go further into air pollution issues in this chapter; see Appendix 1for the healthimpacts of air pollution. 13. Indoor pollution. Indoor pollution occurs when cooking i s done with fuelwood in kitchens that have poor ventilation; fuelwood usually comprises firewood and charcoal. The problem mainly affects women and any children with them during the activity. However, this i s not a particularly urban problem (see Appendix 1for a discussion o fthe healthimpacts o f indoor air pollution). D. Sustainable Economic GrowthandInfrastructureServices 14. Importance of access to sustainableinfrastructureservices. Good access to potable water and environmentally sound sanitation i s critical to achieve favorable health outcomes, which inturn facilitate economic growth and sustained poverty reduction. In particular, improvement in access to safe water enhances school attendance, reduces women's workload, and frees them to be productive in other activities, including those that are economically rewarding and empowering. Morbidity and mortality from poor infrastructure services has put great pressure on the Ghanaian economy, and resulted inhigh treatment costs, as well as reducedproduction and absence from work. Figure 6-1: Health Cost Estimates (in billions of cedis per year) 1800 1600 1400 1200 1000 800 600 I 400 200 0 Water suppiy. sanitation and indoor air pollution Outdoor alr pollution hyQiene Source: Larsen 2006. 15. Figure 6-1 illustratesthe costs relatedto mortality and morbidity from inappropriatewater supply, sanitation, and hygiene practices: approximately 1,620 billion cedis (about US$ 180 million). This figure i s almost 2.1 percent o f the Ghanaian GDP in 2004. Around 26 percent of these costs occur in urban areas. More than 8,000 people die every year in Ghana from diseases related to poor water supply, sanitation, and hygiene conditions. -137- 16. Indoor air pollution also results in large costs: around 1.5 percent of GDP in 2004. By comparison, outdoor air pollution inurban areas createsrelatively minor costs. 17. Government's commitment reflected in the GPRS. Water supply and sanitation play a keyrole inthe Ghana Poverty Reduction Strategy (GPRS I,GoG 2003). GPRS Iwas completedinMarch 2003 and maps out the medium-termstrategy for promoting growth and reducing poverty. It acknowledges that efficient delivery o f basic services i s a necessary ingredient to sustainable development. Energy supply, roads, telecommunications, clean water, and sanitation are all essential components of the basic infrastructure package needed for robust economic activity; they are also necessary to ensure a healthy and vibrant population. The 2004 JSA commended the GPRS Ifor the important links it established between water, sanitation interventions, and healthoutcomes. 18. In the Millennium Development Goals. Access to clean water and proper sanitation facilities are MillenniumDevelopment Goals (MDG). Ghana is one of three countries chosen to prepare a MDG water and sanitation actionplan. 19. Inthe remainder of this chapter, we concentrate our assessment on urban water, sanitation, and waste management issues. The basis for the assessment i s the relatively high estimated damage costs resultingfrom the poor qualities o f these services, costs that particularly affect the poor, and the expected increasedpressure on them inthe years to come from continued, rapidurbanization. Water Supply A. Overview Access to Service 20. Overall limited access to water. About 42 percent of all Ghanaian households have access to pipe-borne water or a tanker service, while a third (33 percent) use a well or borehole. The remaining one quarter of households dependonnatural water sources such as rainwater, rivers, andponds (EPA 2005). 21. Urban water coverage. The Ghana Water Company Ltd. (GWCL), a fully owned public company, i s responsible for urban water supply, and at the beginning o f 2005, had about 80 systems servinga total populationof some six million. GWCL supplies around 60 percent o f the total demand for potable water in the country (EPA 2005). As of 2004, urban water coverage is estimated at about 60 percent and i s expected to reach 85 percent in line with the MDGs (PURC 2005a).*' The Ghana Poverty Reduction Strategy (GPRS I,GoG 2003) finds that 70 percent o f the urban population had access to safe water in2000 (i-e., a somewhat higher figure than PURC's), and establishes a target figure of 78 percent in 2005. For the rural population, these figures are 40 and 54 percent, respectively. The World Bank (2004a) states that 61 percent of the urban population has access to an improved water source. These figures deviate somewhat from those quoted fkom other sources, which indicates that clarification of the actual coverage of the water supply i s necessary. 22. Access of the poor to urban water supply. According to the PURC (2005a) many urban communities face shortfalls in water supply. The poor (defined by living standard measurement criteria) account for around 47 percent o f the total population inurban piped-system areas. The PURC found that only 15 percent o f the poor have access to pipedwater either directly or via yard taps. Only 4 percent of themhave accessto private sources at home. The situationis most critical inAccra andother major cities, because of rapid population growth in the outer urban areas. Inthese areas, the poor sometimes have to pay more than ten times the tariff for water from GWCL deliveries through secondary and tertiary providers. Under the seventh MillenniumDevelopment Goal, "Ensure environmental sustainability," the Government of Ghana in2002 committed to achieve access to improved water sources for 79 percent ofthe population -138- 23. Customers have no choice insome areas about the sources of water available to them, and sellers can exploit the situation. Tanked water inparticular i s very expensive because of the unavoidable costs of transport. About 4.6 percent o f the urban poor obtain water by this route (PURC 2005 a). However, the most common access for consumers inurban areas i s from neighbors and secondary suppliers (35 percent o f the poor, at prices three to four times more expensive than piped supply), and from communal sources and standpipes (32 percent of the poor, around double the price o f pipedsupply). Quality of Services 24. The PURC (2005a) reveals that water leakage i s very high in some areas, and the network i s in strong need of maintenance. Illegal connections to the GWCL network abound, and poor billing and ineffective collection have resulted in a significant shortfall in revenues for water supplied. Moreover, abuse of flat-rate charge assessments occurs where meters are not working. Water Quality 25. Water quality may be viewed from several parts of the supply chain. Assessing "water quality" must take into account: the quality of the raw water at intake, water quality after treatment, the quality of the water fed into the distribution lines and what happens to it before it i s delivered to the consumer, and the water quality at the consumer's premises, including the cleanliness of household storage facilities. Figure 6-2 shows the supply chain, including secondary vendors. When consumers are directly connected to apipeline, grid secondary vendors are not involved inthe supply. Figure6-2: Water Supply Chainwhen SecondaryVendors are Involved 0 5 Consumers 26. Surface water. According to the EPA (2005), the quality o f freshwater in the three major water systems in Ghana i s generally good for multipurpose use. However, data on water quality analysis show marked variation inriver water quality for urban and rural settlements. This is particularly true for rivers close to settlements with a population above 5,000 where records of high fecal contamination (FC) and biologicalhiochemical oxygen demand (BOD) levels have been observed. These levels result from the disposal of liquid and solid waste and human excreta directly into the watercourses, mainly from inadequate urban waste disposal systems. 27. Rivers locatednear industrial areas have received several toxic discharges; consequently, almost all aquatic life has died. These industrialplants (food processors, brewery, tannery, textile) poorly treat or fail to treat their effluent before they discharge it into receiving watercourses, which leads to accelerated nutrientenrichment, eutrophication, and odor (EPA 2005). Examples are the Chemu and Odaw rivers in Accra. A 2000 EPA survey o f sewage treatment plants inAccra showed that over 70 percent o f the plants were dysfunctional. -139- 28. Groundwater. The quality of most groundwater inGhana is suitable for multipurpose use (EPA 2005). However, independent monitoring at various locations indicates a wide variability in groundwater quality in the country. Marked differences occur in the chemical and bacteriological quality of groundwater. 29. Seawater intrusion and high salinity of the groundwater i s mainly attributable to the lowering of the groundwater table, which allows the freshwater-saline water boundary to extend into the freshwater zone. This happens with the overabstraction o f borehole water, natural geologic conditions, and a persistent dry season leadingto the lowering of the groundwater table. 0 Future pressure on water sources. Because rapid growth in urban areas is expected in the future, so also shouldincreasedpressureon both surface and groundwater sources. This couldthreaten the long-time sustainability o f water sources, an issue that should be addressed in future water management policy. 30. Urbanhouseholdwater quality. The quality of the pipedwater reachingconsumers is relatively good, and the water i s generally potable. However, frequent and long interruptions of the water supply require people to keep their own back-up storage in water tanks to avoid shortages. The quality o f the water inthese tanks deteriorates when stored too long, which can cause illness. 31. According to the PURC (2005a), causal evidence suggests that water quality can be severely compromised by the way water i s handled and stored by secondary and tertiary providers, that is, tanker and domestic vendors. Contamination can take place during discharge of the water when hoses are not properly handled, when tanks are not regularly cleaned, and, in some cases, when they are used in the transport ofraw water. B. InstitutionalandFinancialAnalysis Institutions and Their Responsibilities 32. Management of the sector. There are two distinct management arrangements for the provision o f water in Ghana, separated into urban and ruralhmall town water supply. Whereas the GWCL i s in charge o f urban water supply, the rural and small town water supply i s the responsibility of District Assemblies, who are custodians of the systems that are required to be community-managed. The Community Water and Sanitation Agency (CWSA) provides facilitation and advisory support to District Assemblies and communities in the planning, implementation, operation, and maintenance o f their water supply systems. 33. Public institutions. The Ministy of Water Resources, Worh and Housing (MWRW) is the responsible ministry for water supply. It includes a Water Directorate, which has the mandate of dealing with all water-related issues under the ministry (rural, urban, and water resources management). It is in charge of overseeing the Community Water and Sanitation Agency, the Ghana Water Company LTD, and the Water ResourcesCommission. 34. The Environmental Protection Agency (EPA) i s responsible for the regulation o f ground- and surface water sources, including imposing water quality standards and regulating discharges into the various sources. Section 2(h) o f the Environmental ProtectionAgency Act o f 1994" states that the EPA i s tasked with the responsibility o f prescribing standards and guidelines relating to inter alia water. The Water Resource Commission ( M C ) i s responsible for the overall management o f surface and ground- water reservoirs. Section 2 of the Water Resources Commission Act o f 1996'' provides that the commission shall be responsible for the "regulation and management o f the utilization of water resources and for the co-ordination of any policy relatedto them." 'O The EnvironmentalProtectionAgency Act, 1994Act 490 91 Water ResourcesCommissionAct, 1996Act 522 -140- 35. The Ghana Water Company Ltd. (GWCL) i s responsible for urban water supply to industriesand households, and i s also involved in sewage control systems. Their operations have been subcontracted to aprivate company. 36. The Public Utilities Regulatory Commission (PURC) was established as an independent body under Act 538 in 1997 to regulate and oversee the provision of utility services in Ghana. The PURC is committed to ensuring the development and delivery o f the highest quality o f utility services to consumers, and aims to achieve efficiency, reliability, and equity in the provision of these services. At present, the PURC only regulates the water and electricity sectors. Its tasks are to: 0 Provide guidance for rates to be charged for the provision of utility services. 0 Examine and approve water and electricity rates. 0 Protect the interest of consumers and providers of utility services. 0 Monitor and enforce standardsof performance for provision o f utility services. Promote fair competitionamong public utilities. 0 Receive and investigate complaints and settle disputesbetween consumers and utilities. 0 Advise any person or authority with respectto any publicutility. 37. Under the Energy Commission Act of 1997 (Act 541), the PURC is also required to approve charges for the supply, transportation, and distribution of electricity and natural gas, as well as the bulk storage and transportation of petroleumproducts. Financing of the Sector 38. The budget of the MWRWH. As mentioned above, the MWRWH is incharge of oversight of the urban water sector. In2005 the budget of the MWRWHaccounted for 5.2 percent of total budgetary allocations (including donors assistance), representing 1.O o f GDP.'* Under the aegis o f the MWRWHare the GWCL and the Water Resource Commission (WRC). The GWCL received around one third o f the MWRWH's budget, whereas the WRC received 0.4 percent of the total b~dget.'~ large share of the A resources transferred to the GWCL derive from donor assistance (around 95 percent of total GWCL budget), which represents about one third (35.6 percent) of total donor assistance allocated to the MWRWLg4 highshare of donor assistanceto the utility company originates from the World Bank The Urban Water Project, which was implementedin2004 and whose mainbeneficiary i s the GWCL. 39. The GWCL. Over time, the financial situation of the GWCL has deteriorated. The main reason for the weak financial base i s that the utility company barely generates sufficient revenues to pay for maintenance of existing assets; needed investments and refurbishment costs are lacking. The company's operational efficiency i s low because o f overstaffing which puts constraints on financial resources for maintenance and investment. As a result, the company has not been able to adequately service its current stock of debt. Larger investments are carried out through a GoG grant or bilateral donor support. Subsidies from the GoG through the MWRWH's budget have served to pay mostly for electricity and debt service. 40. Implementationof a privatesector partnership(PSP). Inthe past to restore financial stability, the Government of Ghana made efforts to outsource services to the private sector. Since 2005, the government began to pursue a five-year management contract with a new private company to operate the urban water supply systems. The operator i s in charge of day-to-day operation and maintenance of the 92See Appendix 5, Table A5-1. 93See Appendix 5, Table A5-2. 94See Appendix 5, FigureA5-1. -141- GWCL water supply systems while reporting to a director in GWCL headquarter^.^' Responsibility for long-term investment planning and implementation remains with the GWCL. The contract became effective mid-April2006. 41. International experience inthe sector has confirmed that strong utility management i s key to cost recovery, better service delivery, and long-term sustainability. To improve the commercial and technical performance in the GWCL, the company implemented a large severance program.96 This program reduced the wage bill of the company by 40 percent. The severanceprogramis accompanied by increased training for those staff remaining. Efforts are also on the way to gradually restore staff salaries in line with the private sector. Another key priority i s the debt rationalization o f the GWCL, which has only serviced a few o f its 40 loans. GWCL's present debt structure i s unsustainable, and a debt reorganization i s ongoing. The reform i s supported by the Urban Water Project that will enable expansion o f services to low-income households and seek to restore financial stability to the GWCL. 42. Inrecent years, the GWCLhasreceived debt forgiveness from the MinistryofFinance totaling more than US$lOO million. It has also acquired a new loan that will, among other purposes, support the restructuring o f its debt. In order to ensure prudent management o f the new loan, GWCL is requiredto establish a robust framework for determining investment priorities (Strategic Investment Plans), how much and when to borrow, the returns expected, and the impact on tariffs Of particular importance inthe discussion i s how the GWCL loans are contracted (the role o f the MoFEP and on-lending terms), what investmentprojects are private sector-driven (such as the ORET), and how these impact the investment planningprocess and financial outcomes. 43. Revenue collection. As indicated above, GWCL revenue collection i s very weak. Several factors have contributed to low collections, such as the limited number of houses with meters, a highnumber of illegal connections, and a low level of investment; these result in deterioration of service quality and in lowered customer motivation to pay). To tackle the illegal connections, the GWCL intensified its public campaign, and now rewards the denunciation of illegal connections with 200,000 cedis (US$ 20). Leakages or unaccounted water are mainly the result o f weak management of the sector. The GWCL has prepared an investment planbut lacks the fundingto implement it. Removal o f these inefficiencies would allow for an increased lifespan of the system. 44. Donor assistance. The Bank is the only multilateral donor active in the urban water sector. Bilateral participationi s limitedto a few countries, most notably the Dutchand Spanish governments. By contrast, the rural water sector enjoys widespread support from both multilateral and bilateral donors. Donors have been reluctant to invest inthe urban water sector because of both the long gestation period required for a viable PSP option to be identified and implemented and the weak financial situation of the GWCL's. 45. Inlight ofthis background, in2004 the World Bank approved a credit ofUS$103 million for an Urban Water Project (World Bank 2004a). The project's two principal development objectives are to: (a) significantly increase access to the piped water system in Ghana's urban centers, while emphasizing improving access, affordability, and service reliability to the urban poor; and (b) restore long-term financial stability, viability, and sustainability of the GWCL. 95 The UrbanWater Project will pay 100percent ofthe operator's fees inthe initial four years of the contract and75 percent of its fees in year 5. Inyear 5, the operator is expectedto obtain 25 percent of its fees fiom the improved cash flow ofthe urbanwater systems (World Bank, UrbanWater Project2004). 96 In2004, the GWCL employed4,750 staffandhas about320,000 connections. Basedonindustrybenchmarksand the widespread nature of the company's service area, the GWCL believes that it should employ not more than 10 staffper 1,000 water connections. The current ratio is 15 staffper 1,000 connections. To reachthe target of 10 staff per 1,000 connections, the number of employees would have to be about 3,200 (a reduction o f 1,550 workers); however, the GWCL would like to provide for the eventualretrenchmentof about 1,600 staffintotal. This reduction equates to an approximately40 percentdecrease instaffing(World Bank, UrbanWater Project2004). -142- 46. Inaddition, Danida has supported the establishment of the Water Directorate inthe MWRWH through its policy, monitoring, and management support (PMMS) c~mponent.'~ The objectives of the ongoing PMMS are fourfold: (a) water supply and sanitation sector institutions at ministerial, interministerial, and agency levels are performing their stipulated roles with respect to policy development and sector coordination, (b) adequate mechanisms for monitoring and evaluation of the effects o f current water and sanitation practice to support policy decisions are inplace, (c) NGOs and civil society are actively participating in the dialogue on water and sanitation issues, and (d) environmental sustainability i s enhancedthrough the promotiono f SEA inthe water sector. C. Incentives 47. Generally, all customers should pay full costs of the water supply services. This would ensure optimal operation and expansion o f the services. However, poor people may not be able to afford the full costs o f what i s considered to be a basic commodity, and monopoly in supply could yield prices higher than optimal. Thus, regulations of prices and supply conditions couldbejustified, both from an efficiency and social point of view. Regulating thePrice of Water 48. Purpose of regulation. The PURC sets up the tariffs at levels that ensure that the amount of water required for basic needs i s affordable for all customers, including the urban poor. Following the PURC decision, the GWCL applies a uniformtariff structure throughout its area of supply, irrespective of the differences inthe costs o f supply and the level o f serviceng8This allows for cross-subsidization from larger population centers, where incomes are higher than average and the cost o f service i s low (through economies o f scale), to those centers where incomes are lower but the cost of service i s generally higher. (PURC 2005b). 49. The general guidelines for tariff regulation presented in PURC (2005b) state that, in the short term, tariffs shall be based on cash flow requirements plus an increasing allowance for depreciation, but also allowing for reasonable expectations of improvements inefficiency (includingreducedwater losses). In the medium to long term, tariffs should allow for full cost recovery, including capital cost and allowances to return on total capital. D. Government's ReformAgenda 50. Actions taken by the government. As part of a water sector reform, the GoG has investigated several alternatives to improve the performance of the GWCL, and stakeholders have discussed their potential impacts. This has included a 1995 study that examined a public sector option with greater decentralization to the regions. However, this option was rejected. Then the GoG, in consultation with a wide range of stakeholders in 1996, opted to explore a significant public-private partnership (PPP) arrangement through a lease option for the urban water sector; this would both restore financial stability and lay the foundations for attracting private sector investmentin the long run. However, this approach has failed to attract private sector investments. Today international financial markets and international water supply operators are muchmore reluctant to expand their business to developing countries because less investment money i s available and similar assignmentshave previouslyresulted inlarge losses. 97 The PMMS i s a component of the Danish support to the water sector. The program (2004-2008) comprises four components: the District Based Water and Sanitation Component (US$60 million), the Integrated Water Resources Management Component (US$3.5 million), the School Hygiene Education (US$2.5 million), and the PMMS (US$3.5 million). 98 Act 538 allows, but does not oblige the PURC to determine, a nationwide uniform rate structure for the provision o f services provided by a public utility. -143- 51. In 2003, given the low likelihood of achieving financial closure, the GoG reassessed the lease option. The PPP option the government is now pursuingi s a management contract o f up to five years for a private sector operator. The GoG has recognized the importance o f a qualified and adequately compensated staff and has committed itself to financing a large staff reduction program in the GWCL, increased training for those remainingwith the utility, and gradual restorationo f salaries inline withjobs of comparable skills and responsibilitiesinother sectors of the economy. 52. Actions takenby the PURC.One ofthe primary functions ofthe PURC is to protect consumers' interests, especially those of the poor. The PURC (2005a) states that the agency will support any interventions that result in improved and more reliable access to water, and improved continuity and reliability of supply, with the ultimate goal of direct connections. Improvement in supplies will necessarily be incrementalinorder to reach the greatestnumber o f low-income consumers, and the PURC will support interventions that move consumers to lower priced access routes. Inthe short to medium term, many consumers will have to accept improved access to container supply routes while engineering and management improvements seek to increase the amount of water and funding available for improved service; the ultimate goal i s of direct connections when systems have been restored and then extended. The PURC has started several pilot interventions that should provide useful lessons inthis regard. 53. The PURC will insist that the public utility includes pro-poor criteria when undertaking water supply projects. However, the PURCalso recognizes that providingpipedwater access will take time, and that secondary water suppliers will continue to play a role inthe supply chain. Therefore, the PURC has taken the following short-term steps to enhance the capacity of secondary suppliers to deliver acceptable services at an affordable price: Prices charged by secondary suppliers are not to be regulated. Currently the prices charged by the GWCL to the secondary market providers are subject to price regulation. Transportation makes up to 85 percent of the cost of tanked water, over which the PURC has no control. However, where there are market distortions and exploitation of the poor, the PURC will support interventions that move consumers to cheaper access routes and/or support lower prices from secondary suppliers byreducingthe costs. Through collaboration with the GWCL, tanker filling points are beingbrought closer to areas of need, recognizing technical limitations. The GWCL will allocate a percentage (e.g., 10 percent) of their production to secondary providers. Cooperation has been promoted between the GWCL and secondary providers to safeguard the quality of service givento consumers. A "Water Tanker Service Guidelines" has been developed to safeguard the quality of drinking water supplied by tanker and other secondary and tertiary suppliers; the PURC i s monitoring their application. The PURC is collaborating with the relevant agencies, NGOs, community-based organizations and research institutions to address the provision of service to the urban poor and low income households; promoting the involvement of local communities in decisions concerning water supply and service improvements; andbuildingand sharing knowledge withthe poor. 54. The PURC intends to undertake pilot studies that test interventions in delivering water to low- income communities; the goal i s to provide lessons to improve its regulatory policies, the supply and payment options available to the utility, and the criteria for determining investments targeted to the urban poor. 55. The PURC (2005a) notes that no agency seems to have taken the responsibility to create awareness for water quality and for hygiene education that could complement the services in the urban -144- and periurban communities. This is in contrast to what i s taking place in the community water supply subsector. 56. Actions taken bythe GWCL.The GWCLhasundertakenanUrbanWater Project(UWP) aimed at rapid restoration o f water supplies in certain urban areas. The target for the program i s to provide an additional 50,000 connections (either directly or as standpipes). According to the PURC (2005a), at best this number of connections will not reach all of the unconnected population unless at least 15,000 connections are installedas standpipes, each serving 200 people. This means that more than 90 percent of the unconnectedpopulation will remain on container supply. 57. New direct connections cannot be served unless a reliable water supply and spare resource and treatment capacity already exist to meetthe additional demand. Alternatively, new standpipe connections make available only the existing quantity of water that container users currently obtain from GWCL pipes via secondary supplies. They do, however, simplify supply-it would be nearer to home and could stabilize or even reduce the price of water to consumers. 58. It is also the intention of the GWCL to address water leakage and remove illegal connections. According to the PURC (2005a), this i s possible without major investment in additional resources and treatment, and some scope for additional connections may exist if sufficient losses can be recovered. Improvements o f this nature are relatively inexpensive and assist all consumers, but they are not targeted specifically at the poor. 59. The GWCL has agreedto disinfect the tanks belonging to tanker associations that purchase water fkom the utility, to ensure good-quality water. The PURC will insist that regular disinfection be carried out or tanker operators cannot stay inbusiness. 60. The PURC (2005a) concludes that the UWP will not make system improvements for all consumers without significant additional investment, only part o f which can come from improved billing and collection arrangements. Sanitation and Solid Waste Management A. Overview Sector Policy 61. The Growth and Poverty Reduction Strategy (2006-2009). Government's strategy for urban environmental sanitation is embedded in the Ghana's Growth Poverty Reduction Strategy 2006-2009 (GPRS 11, GoG 2005). The GPRS I1highlightsthe fact that adequate sewerage and sanitation facilities are vital to a clean environment and to the prevention o f many infectious diseases such as diarrhea and dysentery. The revised strategy i s centered around two main objectives: to accelerate the provision of adequate sanitation and to improve environmental sanitation, which are linked to a clear set of policy measures (see below for amore detaileddiscussion). 62. The EnvironmentalSanitation Policy (ESP) of 1999. This policy assesses the causes of the poor sanitation and waste management conditions that prevail, establishes the basic principles and objectives for better environmental management, and specifies the institutional responsibilities in the pursuitofthese objectives. -145- Box 6-1: PrincipalofEnvironmentalComponents The principal components o f environmental sanitation and waste management as listed inthe ESPare: 1. Collection and sanitary disposal o f wastes, including solid waste, liquidwaste, excreta, industrial wastes, and clinical and other hazardouswastes; 2. Stormwater drainage; 3. Cleansing o f thoroughfares, markets, and other public spaces; 4. Control of pests and vectors o f disease; 5. Foodhygiene; 6. Environmental sanitation education; 7. Inspectionand enforcement of sanitary regulations; 8. Proper disposal of the dead; 9. Control of animal rearingand o f strays; 10. Monitoringthe observanceo f environmentalstandards. Note: The assessmento f the sanitation and waste management subsector focuses on collection and sanitary disposal o f householdwaste (including excreta) andrelated issues, i.e., nos. 1, 3, 6, 7, and 10. Quality of Sanitation Services 63. Urbanlatrinecoverage. Reliable statistics of urbanlatrine coverage is difficult to come by, but there i s no doubt that the provision of facilities i s far from satisfactory. The World Bank (2004a) estimates that 30 percent of the population in the largest cities i s covered by household latrines, and 30 percent with public toilets. In some poor communities the coverage with household latrines is below 10 percent. 64. Householdtoilet facility.According to the GoG (1999), less than 30 percent of urban residents are served by an acceptable household toilet facility. The GPRS I(GoG 2003) found that 34 percent of the urban populationhad household latrines in2000, and established a target for this figure to increase to 45 percent by 2005. Around 10 percent of household latrines still have pans that are emptied manually; the government wants to phase these out. A sizable proportion o f urban schools are without toilets and some even without water supply. The worst case i s Tamale, where less than 40 percent of the nearly 4,000 schools have toilets (World Bank, 2004b). 65. Limitedsewage infrastructure.Sewage infrastructure is limited, but the majority of dwellings have on-site sanitation systems for disposal of wastewater. Septic tank systems are often characterized by failed soak pits, which invariably end up discharging into open roadside drains and ultimately into storm drains. InAccra, where the largest central sewerage network i s located, the system covers only about 15 percent of the city, mainly areas in the central business district. Close to 20 satellite systems are serving neighborhoods but most have broken down. 66. The operation and hygienic condition of the public toilets seems to have improved considerably after operation was handed over to private operators, but many toilets are still badly managed. However, people are often careless when visiting the toilets and some avoid the use of them altogether, in some cases because of the user fees. Open-air defecation is widespread, particularly among the itinerant traders -146- and workers who live inrural areas and stay inGreater Accra only duringthe day or the work week; their numberis estimated to be about 500,000. 67. Most low-income communities originally had a planned layout, but their growth from within created a situation where some neighborhoods are difficult to access by vehicle (e.g., making it impossibleto empty latrineswith a vacuum truck) (World Bank, 2004b). 68. Healthimpactrelatedto poor environmentalsanitation. At the household level, poor hygienic practices by individuals and communities are compounded by insufficient and ineffective hygiene education. Vector-borne diseases such as malaria and bilharzias are rife because o f the virtual absenceo f programs to control pest and diseasevectors. These factors have a serious health impact-more than half o f all reported diseases are related to poor environmental sanitation with attendant social and economic costs. Flooding causes major damage to public infrastructure and private property. Pollution of water resources increasesthe technical difficulty and cost of providing water. Inaddition, the sight and smell o f inadequately managed wastes createnot only a major discomfort, but also a noxious environment for both citizens and visitors. 69. Water- and excreta-related diseases are prevalent among the poor, and Ghana i s unfortunately among the countries with the highest cases of guinea worm. Diarrhea-related diseases are the third most reported cases in health centers across the country. A combination of all these factors contributes to the highinfant mortalityrate inGhana. 70. In1999,theESPidentifiedsomeoftheunderlyingcausesofthissituationas: Lack o f a clear national goal or vision o f environmental sanitation as an essential social service and a major determinant o f the standardo f living. Lack of a formally constitutedenvironmentalsanitation subsector inthe governmental system of sector development planning. Lack of a comprehensive policy assigning responsibilities for the environmental sanitation subsector inthe governmental systemof sector development planning. Lack of technical capacity inthe MLGRDEto orient and support the District Assemblies inthe provision o f environmental sanitation services. Attempts to transfer to the assemblies environmental sanitation functions performed by ministries and central government agencies, without transferring the accompanying budgets, personnel, and equipment. Weak and/or outdated and poorly enforced legislation on environmental sanitation. Inadequate allocation of resources for environmental sanitation services, both nationally and at the district level. Lack of adequate professional manpower, including engineers, planners, and administrators for planning, management, policy formulation, and research. 71. Some of these shortcomings may have been addressed, for instance, at the institutional and legislative level; however, the situation regarding the quality o f the services does not seem to have improved considerably since 1999. The World Bank (2004b) underlines the same shortcomings o f the system, but adds that the legal and institutional arrangementsare by and large adequate for environmental and social management of these sectors. However, the study emphasizes the importance of institutional strengthening. Quality of Solid WasteManagement Services 72. The GPRS I(GoG 2003) found that in 2000, 91 percent o f the population faced unsafe methods o f solid waste disposal (dumping), and it established a target for this figure to fall to 75 percent by 2005. -147- According to the ESP, less than 40 percent of urbanresidents were then servedby a solid waste collection services. This is about the same share as that foundby the World Bank (2004b). 73. Waste production. Ewool(2004) estimatesthat every Ghanaian produces close to 0.5 kg of solid waste daily (somewhat more inthe largest cities), compared with 1to 2 kg indeveloped countries. O fthis figure, 60 to 80 percent i s food waste. Less than a third o f the daily refuse generatedis properly disposed of, and the rest i s abandonedto pollute the environment. 74. Poor quality of waste collection services. In a few residential areas, door-to-door collection systems are in place, removing the waste at least two times a week. Households pay a fixed fee for this service. However, these services are very irregular because they use old trucks, which break down; they also have a low capacity to receive and treat the waste, and so on. Thus, people are unwilling to pay for the services. 75. For people in areas where residential collection i s not available (typically in poorer areas), communal collection i s offered. This consists of large containers in central places where people can deliver their waste for free. However, many people often need to walk some distance to deliver their waste, leading to frequent illegal dumping in the streets, bushes, and elsewhere. Inaddition, burningof waste inother city areas i s common. 76. Disposal sites. According to the ESP, collected refuse has up to now been disposed of inrefuse dumps with very little consideration for their environmental and social impact. None of the dumps are being covered, and leachate i s polluting the surface and groundwater. Because o f population and economic growth inthe cities, the amount of waste has been increasing, and landfills are beingfilled up. InAccra one landfill is inoperation; another designed landfill is located inKumasi. InTema and some other cities, attempts to build new landfills are in progress. The existing landfills are poorly managed, some of them are leaking polluted water to the surroundings, and they are a breeding ground for mosquitoes, worms, andthe like. 77. Difficultiesin setting up landfills.Landacquisitionproblems will continue to impedethe efforts of local authorities to acquire lands for sanitary landfill operations. Recently, out of 14 major towns known to have acquired land for landfill or other waste disposal operations, seven sites encountered problems that either caused long delays inproject set-up, or resulted inreselection of a site, which firther prolonged construction. Yet according to Ewool (2004), landfills will continue to be the only viable option for solid waste disposal inthe foreseeable future. Kwabenya (1994) shows that incineration would berather costly (US$40-60/ton) compared withlandfilling (US$O.5-2/ton). 78. Problems associated with refuse. Kesse-Tagoe and associates (1998) assessed the development need and investment prospects for solid waste management in 25 urban areas in Ghana. Solid waste management proved to be a very arduous task for the District Assemblies in most towns. Some o f the general problems outlined inthe report include: (a) inaccessibility to refuse disposal sites, (b) refuse sites that have become feeding grounds for domestic animals, (c) refuse collection bins at refuse sites that are scarcely used; and (d) inadequate personnel to supervise waste disposal activities at refuse sites. 79. Inmostcases, refuseiscollectedatthehouseholdlevelandsent to dumpingsitesbymembers of the households-these are most often children. The distance to the refuse site and the height of the refuse container determines the way and manner in which the child disposes of the refuse. The longer the distance to refuse dumps, the more haphazard the dumping of the refuse in drains and other open areas; children who are not able to reach the top o f the refuse containers dump the refuse around, rather than in, the designatedreceptacles. 80. A notable exception is Akwatia, where households pay refuse contractors a monthly fee of 500 cedis (about 6 U S cents) to take away their refuse; these contractors employ donkeys and carts. Because the system i s subsidized by St. Dominic Hospital in Akwatia, the fee i s on the low side. Akwatia turned out to be one of the few areas where refuse management was very well under control. -148- B. Institutional andFinancialAnalysis Institutions and Their Responsibilities 81. Under the Local Government Act of 1993 (Act 462), the provision of appropriate environmental sanitation services, including sanitary sites and final disposal sites at strategic location inurban, periurban and rural areas, falls under the responsibility of the local government (GLFPSF 2005). However, a wide range of institutions participates in policy making and execution of various tasks in these sectors. The following overview is basedon the ESP. 82. Government level. The Ministry of Local Government, Rural Development and Environment (MLGRLIE) is the responsible ministryfor overall sanitation sector policy development at the government level. It has been recently mergedwith the Ministry o f Environment, Science and Technology, which is responsible for setting standards and guidelines for environmental quality. The Local Government Act specifies that its functions include coordination and formulation of policy, developing and issuing technical guidelines on environmental sanitation services and their management, promulgation of national legislation and model bylaws, and direction and supervision o f the National Environmental Sanitation Policy Coordination Council (NESPCC). The NESPCC includes representatives from relevant government agencies, NGOs, and private sector groups and i s responsible for coordinating policies and ensuring effective communication and cooperation between the many different agencies involved in environmental sanitation; it also expedites implementation o f the national environmental sanitation policy. 83. The Environmental Protection Agency (EPA) i s the regulatory agency for environmental quality and effluent standards. The EPA Act of 1994 (Act 490) empowers the EPA, among other things, to prevent and control the release of waste into the envir~nrnent,~~ and to issue environmental permits and pollution abatement notices."' The Councilfor ScientiJic and Industrial Research (CSIR) and its member institutions are to support and undertake research and development activities related to environmental sanitation. The Department of Town and Country Planning i s responsible for supporting the physical planning activities of the District Assemblies (see below), which has wide implications for environmental sanitation management. 84. The Ministry of Education and the tertiary education institutions are responsible for hygiene education in schools, universities, and technical institutions. The Ministry of Health i s responsible for managing and providing health data, supporting hygiene education activities, and contributing to regulation and standard setting for environmental sanitation services. The ministry may also use environmental sanitation information to contribute to the prevention and control o f disease. 85. Local Level. Metropolitan (Accra, Kumasi, Sekondi-Takoradi, and Tamale), Municipal, and District Assemblies are responsible for: Waste Management. Assemblies may provide the services directly or indirectly through private contractors or franchises. They should in all cases maintain an in-house capacity to provide at least 20 percent of the services directly. Public Health Management. This is carried out by Health Departments, with private sector inputs where appropriate. 99 Section 2(d) o f the EPA Act o f 1994 (Act 490) states that one o f the EPA's functions is " to secure in collaboration with such persons as it may determine the control, and prevention o f discharge o f waste into the environment and the protection and improvement o fthe quality o fthe environment." 100Section 2(f) o f the EPA Act o f 1994 (Act 490) provides that the EPA is to "issue permits and pollution abatement notices for controlling the volume, types, constituents and effects o f waste discharges, emissions, deposits or other source of pollutants and o f substances which are hazardous or potentially dangerous to the quality o f the environment or any segment o f the environment." -149- Environmental Monitoring. Assemblies areresponsible for monitoring and enforcing environmental standards and regulations set by the EPA and other national regulatory agencies, and for organized and continual public education on safeguarding the environment. This includes responsibility for monitoring the environmental impact of assemblies' own waste management activities. When private sector service providers are contracted, assemblies are responsible for imposing sanctions on and correcting any violations against environmental standards by such service providers according to the relevant agreementor license. Planning. Monitoring. arid Public Relations. The assemblies shall monitor the effectiveness of the services, take actions to resolve any problems identified, make short-term and strategic environmental sanitation plans to respond to community needs and wider environmental considerations, and ensure goodpublic relations. 86. Regardingliquidwaste management, the assemblies have the authority to regulate, control, and coordinate the activities o f all agencies involved in liquid waste management services. These include regulating technologies for domestic toilets by legislation and application o f the building code. Recommendedtechnologies are the water closet (WC), the pour-flush latrine, the ventilated improved pit latrine (VIP), the aqua privy, the chemical toilet, and any other proven technologies recommended by the MLGR.DE. According to the ESP, bucket (pan) and open trench latrines are actively discouraged and must be phasedout as they do not meet minimumsanitary standards. 87. Assemblies should arrange for the provision of public facilities incentral business districts, major commercial and light industrial areas, local markets, and public transport terminals. Public (communal) facilities should also be provided in low income, high-densityneighborhoods where domestic toilets are not provided inindividual residentialpremises. However, the assemblies shouldpromote the construction and use o f householdtoilets, including the conversion of panlatrines to one of the approved types. 88. Setting standards and monitoring of private sector involvement. The ESP requires that local assemblies transfer management and maintenance of all public toilets to the private sector, either by franchising existing facilities or by granting concessions for the construction and operation of new ones. The assemblies should establish minimum design and operational standards and monitor their implementation. They should also inspect the plans of all new buildings to ensure that they conform to sanitary regulations, and approve issues related to the Certificate of Habitation when the building i s completed. All premises (residential, commercial, institutional, and industrial) shall be inspected periodically to ensure that the occupants observe provisions of the relevant laws and the buildingcode. 89. Regular update of bylaws and sanctions. The assemblies are expected to pass and regularly update bylaws for the effective management of liquid and solid wastes, aggressively market the construction and use of domestic latrines, and enforce bylaws requiring landlords to provide sanitation facilities (World Bank 2004b). For instance, the 1995 bylaws of the Accra Metropolitan Assembly (AMA) Solid and LiquidWaste Management specify the exclusive responsibility of the AMA, its agents, or registered contractors for the management of solid and liquid waste in its area o f jurisdiction, and outline the responsibilities of households, industries, and offices regarding bylaw violations and sanctions. Sections 10 and 11of the laws prescribe a fine not exceeding 200,000 cedis (about US$22) or, in the case of default of payment, a term of imprisonment not exceeding six months, or both, to any person who commits the following offenses: Failing to provide a standardrefuse container as specified by the AMA. Receivingrefuse management services from unauthorized persons. Refusingto allow the AMA or its authorized agents or contractors to collect refuse from one's premises. Indiscriminately dumping refuse in open spaces, drains, gutters, or behind walls, or burning refuse inone's compound. -150- 90. Assemblies' responsibilities for solid waste management The ESP states that the assemblies shall: 0 Requireall premises to have primary storage facilities (dustbins), which meet the approved size, material, and capacity. 0 Prescribe the minimum standard of collection service (including the sorting of refuse, if applicable), taking into account household incomes, housing patterns, and the infrastructure in the service area. 0 Require that the collection service be rendered on the basis o f cost recovery. In deprived areas where the ability to pay may be low, service charges may berelatedto the recovery of operation and maintenance cost only. 0 Designate communal storage sites where solid waste can be discharged into a fixed or movable container incornunities where house-to-house collection i s not appropriate. These sites should be formally and suitably developed for the purpose, so as to contain the wastes dumped and maintain the sanitary conditions of the surrounding area. The containers should be readily accessibleto those dumpingwastes, including to children. 0 Require that the collection and removal of wastes from individual premises and communal storage sites be collected at least twice a week. Use of intermediate transfer stations may be considered where haulage distances are uneconomical. 0 Require that treatment and disposal sites be locatedso as not to create safety and healthhazards or aestheticproblems inthe surrounding areas. 0 Produce medium- and long-term plans for the provision o f treatment and disposal sites, includingpreparationo f Environmental Impact Assessments. 91, Private sector provision of environmental sanitation services. According to the ESP, the bulk of environmental sanitation services should be provided by the private sector, including NGOs and community-based organizations under the supervision of the assemblies. The assemblies reserve the rightsto take measuresto intervene andprovide the services inthe event o f failure o f the private sector to deliver the services. 92. The private sector should operate within policies regulations, supervisory, and licensing arrangements set up by the public sector to promote efficiency and competitiveness. No single private sector organization shall be given a monopoly in the delivery o f services in any one human settlement, except in settlements with a population of 15,000 or less. Inall other settlements, the town or city should be zoned for purposes of sanitation services delivery (GoG 1999). 93. The ESP stresses that, where possible, the private sector should, under franchise or concession agreements, provide environmental sanitation services on a full cost-recovery basis. Where full cost recovery is not possible, the assemblies may enter into contracts with service providers. The ESP also emphasized that tariffs should be set at levels that will not discourage the use of the services, especially where this would createhealthrisks. 94. Provision of solid waste management services. As for sanitation, the private sector should provide the bulkof services. The ESP recommends the followingtechnologies for solid waste disposal: 0 Sanitary Landfill, which i s recognized as one of the most cost-effective methods of waste disposal, and i s recommended for use byMetropolitan and MunicipalAssemblies. 0 Controlled Dumpingwith a cover represents the most basic method of solid waste disposal to meet minimumrequirements, andisrecommendedfor all other District Assemblies. 0 Incineration should be considered as a treatment option only for clinical and other hazardous or noxious wastes. Only simple, easily maintainedincinerators shouldbeused. -151- Composting shouldbe practiced at bothmunicipal and domestic levels where possible. Composting should only be camed out usingsimple methods and on a decentralized basis, as near as possible to the point o fwaste generation. Andit should only be done ifit results innet savings to the assembly interms ofreducedtransport andlandfillrequirements. Recycling should be encouraged for all items such as plastics, bottles, paper, metals, glass, and so forth, as inputsfor production. Financing of the Sector 95. Financing of the Sector at the Central Level: The budget of the MLGRDE. The ministry's budget focuses on promoting the decentralization process and providing capacity buildingto the District Assemblies. With the introduction of the Local Government Act, the core functions of the MLGRDE have focused on decentralization, rural development, and improved sanitation. In2005, the budget of the MLGRDE accounted for 1.9 percent of total budgetary allocations, representing only 0.4 percent of GDP."' In 2004, one third of the ministry's budget financed the decentralization implementation program, which mainly covers salary payments to the District Assemblies (see Table 6-1 below). The three other key programs of the ministry are the Urban Environmental Sanitation Project (Urban IV), PRODICAP, and the Urban V; each received around 15 percent of the ministry's public resources in 2004.'02 Table 6-1: MLGRDE :Spendingand BudgetaryAllocationsin 2004 (in percentage) 2004 2005 Allocated Budget Allocated budget execution budget rate Ministry Headquarters GeneralAdministration 2.3 60.8 5.8 Inspectorate Division 0.3 53.5 0.3 Local Government Support Unit 0.3 46.5 12.2 Decentralization Implementation 33.3 107.6 27.0 Development Planning 0.9 49.3 0.7 EnvironmentalHealthDivision 0.8 76.2 0.6 UrbanIV Project 16.0 121.5 21.0 UrbanV Project 14.6 204.0 2.8 National SanitationProject 3.8 172.4 0.8 Promotion o f District Capital Project (PRODICAP) 16.0 91.8 20.2 Local Government-PRSP 0.1 53.I 0.1 Strengthening Community Development Project 0.0 2152.2 0.0 Community-Based Development Project 0.0 97.6 0.0 Department of Parks and Garden Parks and Gardens 3.6 80.2 2.7 Births andDeaths 3.2 86.6 2.5 Department of Community Development Community Development 4.8 82.6 3.4 Total 100.0 119.5 100.0 lo'See Appendix 5, Table A5-3. lo' PRODICAPfinances the improvementofmarkets, truckparks, andrelatedinfrastructurein22towns. The The objective of the URBANV was to strengthen the technical, financial, and management capacities in23 participating DAs and to finance the provision or rehabilitation of basic infrastructure (including water supply, liquidand solid waste management, storm drainage, markets, etc.). -152- Source: MLGRDE data. 96. In the past, sanitation and waste management services have been subsidized at the local level. The MLGRDE subsidized the collection and disposal o f solid and liquid waste in Accra and Kumasi under its National Sanitation Program (NSP), accounting for 80 percent o f the NSP funds. In addition, the program financed the improvement of the drainage system in major cities, the training o f environmental health workers, and awareness campaign on the need to keep a healthy envir~nment."~ Notably, complementary assistance to MMDAs has also been provided under the UESP IV, a donor- funded program managed by the MLGRDE, that supports infrastructure needs related to urban environmental management as well as financing and institutional capacity building in the five largest cities o f Ghana (Accra, Kumasi, Sekondi-Takoradi, Tamale, and Tema). Financing of the Sector at the Local Level 97. More responsibilities on environmental sanitation and waste management have been transferred to the MMDAs, but adequate transfer of resources and institutional strengthening is lagging behind. Under the Local Government Act of 1993 (Act 462), the responsibility for all urban infrastructure services has been transferred to the assemblies under a decentralized system. In the past, much o f the responsibility, particularly with regard to large investment operations and salary payments, has been managed at the central level because o f delays in the fiscal decentralization (for more information, see Box 6-2 below). Recently some efforts have beenmade to strengthen the capacity o f the MMDAs in waste management services and ani it at ion.'^^' lo5 The NSP will be phased out by 2007, by which time budgetary allocations to the District Assembly Common Fundare expected to increase from the present 5 percent to 7.5 percent. This allows the MMDAs (notably Accra and Kumasi) to directly finance the collection and disposal of solid waste.lo6 Further, the MMDAs already directly manage several components of the follow-up project UESP I1(2004-2010) (see below). However, these efforts seem to be too little if compared with the MMDA's overall weak capacity to deliver services, which i s compounded by limited fiscal decentralization (see Box 6-2 below) as well as poor internal revenue generation. lo3 Information on the allocation o f resources per project that i s related to sanitation and waste management is not available; therefore it i s not possible to assess the level and adequacy o f allocations provided from the MLGRDE directly insupport o f these services. lo4 Inthe 2004 Performance and Outlook, the MLGRDE identifiedas a high priority area for 2005 the policy of strengthening leadership and capacity o fthe District Assemblies and increasing access to safe sanitation. lo5 Since 2002, the MMDAs have also benefited by HIPC finds that came to 402 billion cedis (US$ 44.6 million) between 2002 and 2004. About 20percent had been used by the MMDAs for sanitation projects; however, information on the type o f programs financed, the allocated and released share per MMDA, and the effective utilization o f the funds are not available at the MLGRDE. Overall it seems that the level o f HIPC funds allocated to sanitation programs for each MMDAs (around 110) is relatively low. lo6 Article 252 o f Ghana's 1992 Constitution provided for the setting up o f a District Assembly Common Fund (DACF) to serve as a mechanism for the transfers o f resources from the central government to the local authorities. The article provides that Spercent o f Ghana's total revenue should be paid into the fund for distribution to the local authorities (ISODEC, Tracking the Disbursement o fthe District Assemblies CommonFund2003). -153- Box 6-2: Ghana's Fiscal Decentralization Under the Local Government Act o f 1993, Ghana's Metropolitan, Municipal, and District Assemblies (MMDAs) were given the status o f autonomous local governments with legislative and executive powers within their areas, and the power to prepare and approve annual budgets, raise revenues, borrow funds, acquire land, and provide basic services and local infrastructure. The Local Government Service Act of 2003 provides the legal basis for significant advances on empowering MMDA fiscal capacity. Section 240 (2c) of the 1993 Local Government Act provides that each local government unit shall have a sound financial base with adequate and reliable sources o f revenue. MMDA revenues are limited to the District Assembly Common Fund (DACF) under which 5 percent o f the national budget i s allocated to the districts for capital investment, grants, transfers, ceded revenues, external credits, as well as other internally generated funds (IGFs). Central government transfers (the DACF and ceded revenues) are the main source o frevenues for MMDAs. Shortcomings. The overall resource base o f the MMDAs i s inadequate vis-a-vis their mandates. Available resources are limited to mainly capital projects. Investment needs o f the MMDAs are far greater than the transfers from the DACF.The central government transfers to the D A C F are often not reliable interms o f amount, timing, and predictability. Discretion o f local government over the use o f the DACFi s limited, in that about half o f the fund i s earmarked from the center, mainly for capital projects. The remaining half i s used as matching funds for donor projects. The MMDAs face considerable problems, including limited capacity and lack o f appropriate skills on financial management and budgeting, as well as the implementation o f programs and projects in their jurisdictions. The local revenue base o f most MMDAs is very weak, thus most o f the MMDAsdepend on the DACF for funding o f both service delivery and the provision o f infrastructure. Little incentive exists to control local expenditure since financial oversight and control are primarily done by the central level. Finally, the MMDAs do not have full control over their personal management issues. Because the MMDA staff is appointed through the central civil service and the government transfers cover most of their salaries. there is little incentive for MMDAsto mobilize and use staff efficientlv. Source: ISODEC, Tracking the Disbursement of the District Assemblies Common Fund, 2003, WorldBank, DecentralizationPolicies and Practices Case Study Ghana ParticipantsManual, 2003. Financing waste management services (the examples of Tema Municipality and Kumasi Metropolitan Assembly) 98. Waste management in Tema. The Tema Municipality struggles greatly to provide adequate sanitation in the face o f accumulating complaints about refuse accumulation, lack o f drain maintenance, or inadequate public toilet facilities."' Budgetary allocations provided for waste management services in Tema are relatively low. In2004 and 2005, less than 5 percent o f Tema's total budget was transferred to its waste management department (WMD), while on average 92 percent o f the budget was allocated to the central administration. Often, even less i s released to the WMD during the fiscal year; for example, the budget execution rate o f the WMD came to only 85 percent in 2004.'08 Inadequate funding for waste management services is reflected in the often old infrastructure, equipment, and vehicles. Furthermore, because the sewer lines are old, the maintenance cost from frequent repairs by staff i s high.Evidence also suggests that more than half o fthe vehicles may be out o f order.log lo'Tema houses apopulation of380,770. `OsSee Appendix 5, Table A5-4. logTema WMD, Financial accounts, January-December, 2004. -154- Table 6-2: Budgetaryallocationsto the municipality of Tema by Department, 2004-2005 (in percentages) 2004 2005 Waste Mgt. Dept. 4.9 4.0 Environment HealthDept. 0.8 0.0 Horticulture Dept 0.1 0.2 Engineers Dept. 0.2 0.6 Town & Country Planning Dept 0.0 0.1 Development Planninghudget 0.9 1.o Internal Audit Dept. 0.2 0.4 Finance Dept. 0.6 1.5 Legal Dept. 0.1 0.1 TEMA CentralAdmin. 92.0 92.1 Total 100 100 Source: Datafrom Tema municipal government. 99. Waste management systeminKumasi.'lo contrast to Tema, Kumasi allocates proportionately In more resources to waste management."' However, in Kumasi, as in Tema, the quality o f waste management services has sharply deteriorated over the past years. The population growth rate o f the city has exceeded its capacity to provide adequaterefuse management services. Authorities are able to collect and appropriately dispose of only 40 percent of refuse generatedby households, institutions, and markets daily. Because of the city authority's lack o f capacity, almost 66 percent of refuse generated inresidential areas does not reach the city landfill and i s dumped inthe immediate surroundings. The city's final waste disposal site is currently at Kenyaase, 12 kmfrom the town center, where open dumping i s practiced with no prior treatment o f the waste. This method creates a nuisance to nearby residents in the form o f litter, foul odor, smoke, and fire hazards. Recycling in Kwnasi i s in its infancy. A study evaluating the solid waste management system in Kumasi (Post 1999) concluded that the Kumasi Metropolitan Assembly (KMA) lacks the resources, the authority, a clear and consistent mandate, and sufficiently trained and supported staff to ensure effective and appropriate waste services for its communities. 100. Revenue collection is in general very weak across all MMDAs. The assemblies regulate user charges for such services as collecting refuse and emptying septic tanks; the central government also regulates some charges. These charges are generally kept below cost and are affordable as most services are for low-income beneficiaries. Consequently, the low cost recovery and overall low financing base of the MMDAsmake it difficult for them not only to operate and maintain the existing systems, but also to carry out their own infrastructure investments. A study by the German development assistance organization GTZ on revenue collection in the Accra solid waste and night soil disposal system over the period 1995-1997 showed that revenue, as a percentage o f the operational cost of the Accra Metropolitan Assembly (AMA) Waste Management Department, consistently remainedunder 41percent.' l2 101. Another critical factor that contributes to poor revenue collection i s low remuneration in public service. As a result, revenue collectors are less motivated and, in turn, collection services are irregular; 'loKumasi i s the second-largest city inGhana afier Accra, and has a population o f around 1.170 million. '11According to a World Bank study, in 1997 the solid waste and sanitation sector benefited by the largest share o f recurrent expenditures from Kumasi's budget, while receiving around 45percent o f capital expenditures (mainly for refuse trucks). (World Bank, The Role o f City Governance in Reducing Urban Poverty-The Case o f Kumasi ). This high allocation o f resources in favor o f waste management services seems to be still the case through the resent (World Bank, Project Appraisal Document Second UESP 2004). GTZ, Towards an Improved System of Revenue Collection for the Waste Management Department o f Accra MetropolitanAssembly (AMA),1997. -155- staff lack qualifications; also, frequent staff changes occur, which impact the performance of the MMDAS.''~ Other factors are the lack o f an effective control mechanism to check flaws in revenue collection at dumping sites and from houses for department services, deficiencies in the system to calculate the collection cost, the compound housing structure (constraints in the targeting of individual consumers), and management laxness in enforcing revenue contracts with some major agencies (encouraging other contractors to defa~lt)."~ On the whole, the difficulty in institutionalizing effective mechanisms for revenue generation and inretainingstaffto do so i s a major challenge for the MMDAs. 102. Efforts in strengthening internal revenue collection pay off. Several examples show that efforts undertaken by several MMDAs in the past to strengthen internal revenue collection have yielded positiveresults. Tema started an intensive programof public education, especially on refuse collection. Its WMD also improved the collection system: the WMD had increased the number of collection points by engaging banks and post offices in revenue collection in addition to the district office. As a result, the WMD was able to achieve a 120 percent collection rate in 2004 and it reduced the incidence of fraud. Tema also won an award for being the cleanest city in 2004, mostly because of high investment in equipments (e.g., the purchase of a bulldozer). Another example is Takoradi, the third largest city in Ghana, which won an award in2002 as the nation's cleanestcity after vigorous efforts to improve internal revenue generation, better enforce bylaws related to the urban environment, and establish a well- functioning contracting systemfor refuse collectionthat included drain cleansing. 'l5 103. Many efforts have been made to increase private sector involvement in refuse collection over the past few years. At the end o f the 199Os, the MMDAs began to divide their city into waste collection zones and to contract out solid waste collection to the private sector. They collected fees for services and used them to pay the private firms. However, the fees charged by the private operators impacted the MMDAs' ability to pay them. For example, after first creating a private monopoly for refuse collection in 1990, Accra could not afford the collection fee of US$12per ton in the long term and in 2001 had to abrogatethe contract. Recently MMDAsbegan to award franchises on a pilot basis whereby the contractor recovers at least part of the cost directly from the user. However, this partnership has had limited success so far-MMDAs have continued to accumulate arrears in payments to the private operators. For example, in2003 AMA was 28 billion cedis (US$3.1 million) inarrears inpayments to the members of the Association of Service Providers, mostly for evacuating communal containers in low- income areas, where the residents pay no collection fee.'16 Donor Assistance in the Sector 104. The World Bank Urban Environmental Sanitation Program (UESP). The main donor- financed program inthe sector i s the UESP. The program i s based on an integrated approach combining infrastructure provision with capacity building.The first UESP started in 1996 and was closed by the end of 2003, but the AFD and the MLGRDEstill finance some components. Some o f the main lessons learned from the project so far include: (a) the inadequate capability of the assemblies to plan for and carry out adequate O&M of the infrastructure in spite o f past capacity building, (b) the importance o f limiting public latrines to public places and household latrines to residential areas in order to achieve significant sanitation-related health improvement, and (c) the need to mainstream project management into the `13According to a recent study assessing the disbursement o f the DACF, improved efficiency o f land administration and stricter monitoring of revenue collectors and finance officers by their supervisors and the public could bring about positive results inrevenue generation (DFID, "Tracking the Disbursement o fthe District Assemblies Common Fund"200[41). 114DFID, "Tracking the Disbursement of the District Assemblies Common Fund" 200[4] , GTZ, Towards an Improved System o f Revenue Collection for the Waste Management Department o f Accra Metropolitan Assembly (AMA),1997 `I5World Bank, Project Appraisal Document Second UESP 2004. 116World Bank, Project Appraisal Document SecondUESP 2004. -156- responsible MMDAs (past program components were not adequately integrated into the operation o f the MMDAs,whichreducedtheir ability to carry onwiththe activities without project support). 105. The new project, UESP-2, seeks to improve urban living conditions with regardto environmental health, sanitation, drainage, vehicular access, and solid waste management in a sustainable fashion, with special emphasis on the poor. The project area comprises the five largest towns inGhana: Accra, Kumasi, Sekondi-Takoradi, Tamale, andTema. 0 Mainstreaming the management of UESP-2 in the MMDAs. With the exception of Kumasi, the MMDAs have not implemented sizable infrastructure projects on their own in the past years. Programs financed by donor assistance (e.g., UESP-1) had been carried out by the MLGRDE or other sector ministries. InJanuary 2004, the MLGRDEdecided to mainstream the management of all externally assistedprojects inresponse to one of the recommendations of the 2002 Country Portfolio Performance. UESP-2 is the first project inwhich the MMDAswill be responsible for the implementation of their part of the project. The MLGRDE implements only the institutional strengthening component and i s responsible for the coordination and monitoring of the project. 0 Inaddition, the Netherlands intendto provide aidto the PMMS component (financedbyDanida) to support the creation o f a directorate for environmental sanitation within the MLGRDE. Other assistanceprovided by the Development Partners i s limited largely to road and drainage work, financed by the Agence Franqaise de DCveloppement. The Nordic Development Fund is also providing some assistanceinthe form o f institutional strengtheningfor urban waste management. C. Incentives 106. Environmental sanitation and waste management are public goods. Improper waste disposal by one individual affects all community members.Mosquitoes that breedinone placemay bite people in another, and contamination of food will affect all who consume it. Ensuring good sanitation and waste management i s therefore the responsibility o f all citizens, communities, private sector enterprises, NGOs, and government institutions. 107. As for water supply, all customers should pay full costs of sanitation and waste management services. This would ensure an optimal operation and expansion of the services. However, if charges are too high, people will go into the bushes for defecation and dump solid waste in places where it would harm the environment. Thus, delivery of waste at public collection sites should continue to be free, and public toilet charges shouldnotbe set at levels so highthey cause a drop inservice demand. 108. Private solutions-contracting private operators for providing sanitation and waste management services-should be encouraged.Experiences from Ghana and other countries show that this tendsto improve the quality andefficiency ofthe service. Localprivate operators are flexible andfree to make efficient solutions, and, through properly written contracts, will also have incentives to implementcost-efficient services. 109. The lack of a sanitation subsector or independent implementing body at the local level to providethe servicesin a cost-efficientway is in evidence. Givingthe same institution responsibility for both contracting private operators and operating some o f the same activities may cause conflict o f roles and interests. To the extent such conflicts exist, the overall policy and contracting responsibility should remain within the assemblies, and a separate public or partly private owned agency responsible for providing some of the various services should be established. This could also facilitate an upgrading o f the status of the sanitation and waste management service workers, which is highly needed. Better salaries, training, and improved awareness raising are all necessary incentives to enhance the quality of the services. 110. The needed upgrading of sanitation and solid waste managementsystems will require huge investments. This will in turn increase operational and maintenance costs. High- and medium-income -157- households may be able to pay for some o f this, especially for investments innew toilets intheir homes. They might also be willing to pay somewhat more for the operation o f door-to-door services, especially if the quality o f the services improved and became more regular. 111. The poor's willingness to pay for solid waste management and toilet facilities is low. Thus the pubic sector and donors would to a large degree have to finance investments and increased O&M costs. The assemblies will hardly be able to finance any o f this without huge subsidies from the government. However, because o f the huge investments needed, the GoG will have difficulty raising the necessary funding. Thus, donor funding will be essential for these sectors to enable the country to reach its Millennium Development Goals. D. Government's ReformAgenda Targetand Strategiesfor Sanitation and Solid WasteESP 112. The ESP has established some outputs and targets for environmental sanitation and waste management to be achieved by 2020. Table 6-3 below indicates the progress made so far, as well as challenges faced inachievingthe ESP outputs. Table 6-3: ESP Targets for Environmental Sanitationand Waste Management Target Reform progress All solid wastes generated in urban areas are Eighty percent o f solid waste i s collected; present regularly collected and disposed o f in adequately systemi s not adequate controlled landfills or by other environmentally (1) not enough landfill equipment acceptable means. All excreta are disposed o feither byhygienic on- Off-site: Central sewer system with defects, site disposal system or by hygienic collection, treatment plan is not functioning. On-site: largely treatment, and off-site disposal system. fine but with some deficits . All panlatrines are phased out. Ongoing At least 90 percent o fthe populationhas access to Not yet achieved-some parts successful, other an acceptable domestic toilet, and the remaining 10 less so. percent have access to hygienic public toilets. Hygienic public toilets are provided to the transient To a large extent implemented population inall areas of intense public activity. Active sanitary inspection and vector control No active vector control program. programs are inplace, and the incidence o f malaria, Sanitary inspection i s not adequate, has low bilharzias, and other vector-borne diseases is falling. impact. Environmental standards and sanitary regulations Legislative enforcement is low. are strictly observed and enforced. The majority o fenvironmental sanitation services About 80 percent o fthe services (notably are providedbythe private sector. collecting and disposing solid waste) are provided bythe private sector. 113. Strategies stated in the GPRS II(2006-2009). The GPRS I1(GoG 2005) include a set o f policy measures that will be revisedon an annual basis (see Table 6-4 below). -158- Table 6-4: Targets in GPRS I1 Target Reform progress Improve environmental sanitations. Promote physical planning inbothurban and rural Ongoing areas (acquisition o f land for the treatment and disposal o f solid waste inmajor towns and cities and the establishment o f water and sanitation boards in small town). Support public-private partnership insolid waste Ongoing management. Buildthe capacity ofDistrict Assemblies to better Ongoing manage environmental sanitation. Accelerate the provision of adequate sanitation Promote the construction anduse o f domestic latrines. Bothare ongoing under the UESP 11. Improve the treatment and disposal o f waste inmajor Solid waste (progress hadbeenmade to towns and cities. some extent) Liquidwaste (sewerage areais better; however, still deficits inslum neighborhoods). Enforce laws on the provision o f sanitation facilities Enforcement i s low, needfor significant by landlords. institutional strengthening o f District Assemblies. Promote widespread use o f simplifiedsewage systems None (lack o f funds). inpoorareas. Improvethe management o f urban sewage systems. Ongoing underUESP. Improvehouseholdand institutional sanitation, Ongoing underUESP. including schools. Rationalize andupdate local assembly bylaws on safe Ongoing (submittedbylaws to Regional management o f liquidand solid waste at the Coordinating Council). household level. Integrate hygiene educationinto water and sanitation Ongoing on small scale. delivery. Implementation of Reforms 114. Difficulties in implementing Ghana's sanitation strategy. The government's strategy and emphasis on wastewater i s less advancedthan it is for water supply (World Bank, 2004a), andthe adopted sanitation sector policy i s proving difficult to implement. Apparently, little demand exists for pipedsewer service, collection, and treatment. Further, the country has serious constraints on its operational capacity for treatment. Finally, a perceived, but as yet undocumented, inability to pay for this service i s seen among urbanresidents. Followinga recent workshop inMay 2006, steps will be takento discuss arevised sanitation policy and to develop a sanitation directorate in the MLGRDE to order to strengthen the implementation of sanitation policies. 115. Progress in waste management. Waste management is one of the most frequently raised concerns bypeople inurban areas and by government representatives (World Bank, 2004b). Considerable progress has been made in recent years to improve the situation, notably through the creation and empowerment of the Waste Management Departments o f the Metropolitan or Municipal Assemblies (MAS), the growing involvement of the private sector in collection, the increasing reliance on user charges for solid and liquid waste collection, some improvements in internal revenue collection by the MAS, and agreater awarenessthat refuse dumpshave to bereplacedwith sanitary landfills. 116. A need to improve revenue collection. The required subsidy from the MAS, which today amounts to nearly half their total budget, i s not regularly available. Urged on by external assistance agencies, the central government i s putting pressure on the MAS to increase their internal revenue -159- generation. Experience has shown that consumers are ready to pay more for waste management services as they improve, especially ifthe private sector provides for these services. 117. Preparing an annual waste management plan for the EPA. Because o f their weak financing base, one o f the main challenges for the MMDAs i s the maintenance o f infrastructure and equipment. In an effort to tackle this problem, the EPA announced that it would put in place modalities making it mandatory for all assemblies to present the agency with a yearly waste management plan. The plan would help curb the haphazard waste disposal provided by most assemblies; it would also address issues like target groups chargedwith waste collection and sites for waste disposal. The Way Forward KeyFindingsandRecommendations 118. Strengthen the planning and monitoring capacity of the Ghana Water Company Ltd. (GWCL), and follow through with a management contract for an external operator. The supply o f piped water i s inadequate, regarding both the extension and the quality o f the services. A low proportion o f the poor urban population has access to potable water. In fact, the supply to those who are connected i s often interrupted because of leakages and other factors. Thus, a general upgrade o f the water supply sector i s needed, both through improved operation practices, extension o f the pipe grid to new areas, and better maintenance o f the existing grid. New water sources are also needed, especially in Accra. The main challenges to improving the urban water supply are to improve the operations o f the GWCL, provide funding for further expansion o f the piped system, and improve the quality o f the water supplied by secondary vendors. Strengthening the planning and monitoring capacity o f the GWCL should ensure that the management contract with the external operator i s efficiently managed, and should contribute to improved quality and fewer interruptions of services. Furthermore, it should improve GWCL'S role in strategic investment planning to facilitate medium- and long-term investment in the new capacity. This measure would increase GWCL revenues in the medium term and enhance investor confidence. By extension, it would also contribute to medium- and long-term financial stability inthe sector, and increase its ability to sustain debt repayment. 119. Invest in new landfill capacity, upgrade all waste collection and treatmentfacilities, and expand existing collection systems to uncovered areas. Almost all parts o f the sanitation facilities and solid waste treatment in Ghanaian urban areas are far from satisfactory. Most sections o f the various systems are working poorly, and in several poorer urban areas, these services are almost nonexistent. Therefore, the sanitation and solid waste management systems need upgrading, as does the quality o f the services. The services must be expanded to poorer urban areas that are without these services today. Domestic and public toilet facilities mustbe expanded and upgraded. Most cities neednew landfills immediately. 120. Continue the implementation of the Local Government Service Act and the outsourcing of operations toprivate operators. Badly needed i s a responsible subsector at the assembly level, where the responsibility for providing the sanitation and waste management services lies. Moreover, the overall financial resource base o f the local assemblies i s inadequate, given their responsibilities. More DetailedRecommendations A. Water Supply 121. The above analysis shows that the supply o f piped water i s inadequate, both regarding the extension and quality o f the services. A low proportion o f the poor urban populationhas access to potable water, and the supply to those who are connected suffers from frequent interruptions. Sales o f water through secondary vendors and improper storage o f the water in households frequently lead to disease. Thus, a general upgrade of the water supply sector is needed, through improved operational practices, -160- extension o f the pipe grid to new areas, and better maintenance of the existing grid. New water sources are also needed, especially in Accra. The main challenges to improve the urban water supply are to improve the operations o f GWCL, provide funding for further expansion of the piped system, and improve the quality o f the water supplied by secondaryvendors. 122. Most of the necessary framework for implementing a sustainable water supply system for the urban areas i s inplace. The necessarylegislationregardingthe various parts of the system i s adopted, and the institutions neededto run the system are established and their roles clearly defined. Establishingthe PURC has been particularly important to facilitate the regulation o f tariffs and quality of supply o f the utilityand the secondary providers. However, the PURC is still inits infancy and its enforcement power i s weak. 123. The achievement o f these overall, long-term goals would result in a healthier urban population and increase life expectancy. The following actions are therefore proposed: Policy and RegulatoryImprovements 0 Follow through with the management contract and increase private sector participation. This should increase GWCL revenues inthe medium term and enhance investor confidence. It should also contribute to medium- and long-term financial stability inthe sector, and increase its ability to sustain debt repayment. 0 Reduce leakages and illegal connections. This action should make more water available for newcustomers inthe mediumterm (2015). 0 Introduce a self-financing mechanism for the PURC.This measure could contribute to the strengthening of the institution. Institutional Capacity Building 0 Strengthen the planning and monitoring capacity of the GWCL to better manage the service delivery of the private operator. This would ensure that the management contract i s efficiently managed, would contribute to improved quality, and would ensure fewer service interruptions. Furthermore, it should improve GWCL's role in strategic investment planning to facilitate medium- and long-term investment innew capacity. 0 Improve monitoring of secondary providers. The PURC has begun actions to improve the quality of the water supplied by secondary vendors. However, this work needs to be substantially strengthened,regardingbothcapacity and quality. 0 Intensify awareness raising about healthy water storage and treatment among the population. People need to be made aware o f the relation between water storage and illness in order to safeguard their health. 0 Ensure long-term water quality and source sustainability to provide increasing water supply in urban areas. The water quality at the source i s relatively good today, but this will likely change in the future from increased pressure on surface and groundwater sources. This calls for a proactiveplanningapproach. 0 Developwater managementpracticein line with international best practice. This should be the long-term goal for water management, and should include introducing risk management tools relatedto water safety planning. Infrastructure, technologies, and output-based instruments 0 Renew the old distribution system. The need for this i s huge, both in the short and medium term. 0 Improve maintenanceof infrastructure. Upgradingmaintenance is also an urgentneed. -161- Improve water storage facilities. This measure could yield substantial short-term health benefits. Establish new tanker filling points closer to areas of need. For short-term water supply improvement inthe poor areas, this would be arelatively inexpensive option. Expandpipelinesystems to uncoveredareas. This expansion is important bothinthe medium and longterm to improve humanhealth. Develop new water sources. Existing water sources are overexploited, and new sources are greatly needed. B. Sanitation and SolidWaste Management 124. It is obvious from the analysis that the sanitation facilities and solid waste treatment inGhanaian urban areas are far from satisfactory. Almost all parts o f the various systems are working poorly, and in several poorer urban areas these services are almost nonexistent. The resulting diseases among the populationimpose large costs on Ghanaian society. 125. The lack of a responsible subsector at the assembly level, where the responsibility for providing the services lies, i s a major problem. Given the responsibilities of the local assemblies, their overall financial resource base i s inadequate. 126. Contrary to some indications, it seems that the legislation and institutional structure in both the sanitation and solid waste management sectors are for the most part adequate to implement sustainable services inthese sectors. The roles and responsibilities o f the various actors and stakeholders are defined. Also, overall goals for the service standards inthese sectors are well defined, and detailed guidelines for how the various parts of the systems shouldbe designedand operatedare mostly inplace. 127. The achievement of these overall, long-term goals would, as mentionedabove, mean better health and an increased life expectancy for the urban population. Toward this end, the following actions are proposed: Policy and Regulatory Improvements Continue the implementation of the Local Government Service Act. Focus should be on fiscal decentralization, leading to increased autonomy of the local government regarding public services. Improveoverall management of decentralizedfunctions. Inthe longer term, this would lead to increased sustainability of urban services at the central government level. Beginimplementingthe Waste ManagementPolicy.A start would be to conduct a Sanitation and Waste Management Policy Assessment and increasethe involvement o f key stakeholders in strategic decision-making and key policy dialogue. Continue outsourcing operations to private operators, and improve revenue collection. This action should improve the efficiency o f the services in the short term and yield better services. Make adjustments in sanitation and waste management policy. Included should be the harmonization of the functions o f institutions tasked with the responsibilities o f the sanitation and waste management sector. An important outcome could be better integration of sanitation and waste management issues into the local economies. Implement recommendations of the Law Reform Commission on harmonization of laws andbylaws.The result shouldbe a clear, coherent, and efficient institutionalapproach. -162- 0 Consider establishing a regulatoryhpervisory body for the sector (a Sanitation Directorate), which couldhelpimprove operations and services. Institutional Capacity Building 0 Intensify a sustained program of raising awareness among the population on safe sanitation and waste management practices. Raising awareness about the relation between good sanitation and waste handling, pollution, and illness i s essential to change peoples' behavior and to experience the full effect of new investments. This program should be an important part o f the education in schools, but should also be targeted at the population in general, especially the poor. The responsibility for hygiene issues and education should be clarified, bothat the ministerial and local level. 0 Conduct an assessmentof stafftraining needsas apreparationfor a training program. Strengthenthe capacityof District Assemblies with a focus on waste management services, including improved control and enforcement ofbuildingcodes, and so on. 0 Retrain and reorient sanitary inspectors. This training could be important for the enforcement of rules and guidelines. 0 Further develop and implement the policy for recycling and composting into a more systematic segregationof waste, which could improve environmental and public health inthe longer run.Private initiatives to start recycling projects shouldbe encouraged. Clarify the responsibility for hygiene policy and education. This seems necessary both at the government and local levels. The Ministries o f Health and Education should be given more responsibility. Improve infrastructure, technologies, and output-based instruments by: 0 Investingin a new landfill capacity.Most cities neednew landfills immediately. 0 Upgrading all waste collection and treatment facilities. Almost all parts o f the sanitation and solid waste management systems needupgrading, as does the quality of the services. 0 Expandingthe existing collectionsystemsto uncoveredareas. These services must extend to poorer urban areas that are without these services today. Domestic and public toilet facilities mustbe improved andupgraded. -163- 2. Y 0 n 01 B 1 U B .I s n d 141 7 Conclusion 1. Environmental degradationcontinuesto be a major challengefor the Government of Ghana. Although the challenge prima facie appears to only impact the natural resource and environment sector, it has far-reaching economic implications for the GoG. This i s clear upon close examination of the main sectordassets drivinggrowth inGhana, namely, forests and wildlife, mining, agriculture, and urban areas. In fact, the CEA identifies environmental degradation as one of the main impediments to Ghana's economic growth. The key to addressing this challenge lies in the adoption of a multifaceted approach designedto examine the legal, institutional, andpolicy regimeunderpinning the environment sector. This chapter summarizes the conclusions of the CEA, provides key recommendations that are designed to assist the Government of Ghana, and discusses various financing instruments that are being used or will be usedinthe near future to implementthe recommendations of the CEA. Findings 2. The new estimate of the cost of naturalresource and environmental degradation reinforces the need for making environmental concerns a priority in policy-making. The CEA extends the earlier estimates of the costs o f natural resource degradation to cover the costs o f environmental health effects related to water and air pollution. The total estimated annual cost of natural resource and environmental degradation i s nearly U S $730 million or 9.6 percent of GDP."' The degradation of the two key natural resources - agricultural soils and forests and savanna woodlands - costs at least US405 million annually (about 5.3 percent of Ghana's annual GDP) and health effects account for nearly US$325 million or 4.3 percent o f GDP. This underscores the urgency for policy makers to understand and integrate environmental concerns into the broader economic policy-making process. 3. Naturalresource and environmentalmanagement are key to sustaining growth and poverty reduction. This CEA illustrates very clearly the linkage between natural resource management and economic growth. It demonstrates that, based on the current trends, natural resource and environmental depletion i s a limiting factor for sustained economic growth. By contrast, better natural resource and environmental management can contribute to sustainable growth. More specifically, under reasonable assumptions, inan economy such as Ghana's, for eachpercentage point of environmentaldegradation, the rate o f growth decreases by 0.1 percent. In practical terms, this means that environmental and natural resource depletion in Ghana (which accounts for 9.6 percent o f GDP) i s reducing by 1 percent the potential for economic growth inthe country. 4. Ministries, departments, and agencies in all the natural resource and environment sectors face common challenges.It has become clear that developing collaborative cross-sectoral approachesto address these common issues will be more useful and efficient than dealing with them separately in each sector. The following section outlines overarching policy recommendations for natural resource and environmental issues. Recommendations 5. The three main recommendations (summarized in table 7.1 below) to ensure adequate consideration of environmental and natural resource issues in the broader policy agenda are as follows: Removing policy, regulatory, and institutional bottlenecks is vital for reducing vulnerability of the poor in both rural and urban areas. In the agriculture and urban environment sectors, cleaner and low-tech options such as additional water pipes and SLM techniques are available to reduce environmental stress. These technologies may contribute 117This is a percentage o f GDP in2003. Please see Appendix 1for how these estimates were reached. - 167 - significantly to lessening the vulnerability o f the rural and urban poor. However, these technologies are not widely adopted because a number o f obstacles and bottlenecks exist, including policy, regulatory, and institutional barriers. To remove these barriers, actions that can createan enabling environment for scaling up these technologies are urgentlyneeded. Strengthening environmental governance is key to ensuring that natural resources contribute to greater wealth and sustainable growth. Inhigh rent-seeking sectors such as forestry and mining, more transparent and accountable fiscal management of relevant agencies, including the Forestry Commission and Minerals Commission, i s of particular importance to avoid short-lived consumptionof natural resourcesthat will leave a country poorer than before. Getting the most from natural resources implies better regulation and management, and less wasteful utilization, of natural resources; more effective capture of the economic value o f the resource; better collection of revenues; and higher levels ofreinvestment and savings. Box 7-1: What is environmentalgovernance? Governance, broadly speaking, relates to who has authority, how decisions are made, and how decision-makers are heldaccountable. It then follows that environmental governance concerns who has decision-making authority over natural resources and the environment. The seven elements of environmentalgovernance, all o f which are covered by the NREGProgram, are the following: 1) institutions and laws relating to who makes and enforces rules for governing NR, 2) participation and representation of the public, 3) authority level (from local to international) over NR, 4) property rights and tenure over NR, 5) the impacts of markets and financial flows on NR and the environment, 6) how ecological and social science is incorporatedinto decisions on NR use to reduce risks and identify new opportunities, and 7) accountability of those who manageNR and transparency o f their actions. Source: "Decisionsfor the Earth: Balance, Voiceand Power." WorldResourcesInstitute, 2003 Reinforcingcoordination and dialogue to mainstreamENRMis critical.Environment is a cross-cutting issue that requires coordination at the highest level. Recognizing this, the Government of Ghana i s considering the creation of an environmental oversight mechanism- perhaps at cabinet subcommittee level-to examine environmental integration across the full range of GPRS interventions. Typically, government agencies prepare, review, and approve environmental policies that have an impact on local communities. Although local communities have the potential to play a pivotal role inthe better management o f Ghana's natural resources, to date they have not been actively engagedinthe decision-making processes. Inorder to create a comprehensive systemfor environmentalmanagement, it i s important that all stakeholders are actively engagedinthe policy dialogue. -168- Integrationof CEA Sector Recommendations 6. There are a number o f vehicles and instruments that GoG has usedand can continue to use to carry forward the recommendations outlined in this CEA. The CEA sector recommendations have to a certain extent beenincluded inthe general budget support provided by the Multi-Donor Budget Support (MDBS) and the World Bank's Poverty Reduction Strategy Credit (PRSC), and have been incorporatedina number of donor investment projects, as discussedbelow. However, the CEA has served to increase the recognition among GoG and DPs that many natural resource and environmental problems are relatedto poor governance and are common to all sectors. Itwas considered that the MDBSPRSC could not focus enough on natural resource and environmental governance issues, while existingdonor investment projects were too small or limitedinscope to adequately address these issues. The Natural Resource and Environmental Governance (NREG) sector budget support program was thus designedto address this recommendation of multi-donor support for the broader issue o f NRE governance. The NREGProgram benefits from economies o f scale by including the three sectors of forestry and wildlife, mining, and environment, rather than having three separate programs for each sector. The CEA has also driven the policy orientation of the upcoming NREGProgram: the NREGpolicy matrices draw significantly from the recommendations providedat the endof eachchapter. 7. The following sections give an overview of the integration o f CEA sector recommendations into the harmonized general budget support provided by DPs A. General Budget Support 8. Harmonized general budget support has been provided by bilateral donors through the MDBS and by the World Bank through the PRSC, which is part of the greater MDBS and had untilrecently aperformance assessment framework (PAF) separate from that ofthe MDBS.This general budget support has played an important role in supplementing the GoG's GPRS 11. This GoG strategy consists o f three pillars: (a) private sector competitiveness, (b) human resource development, and (c) good governance and civic responsibility. The CEA has attempted to identify areas and objectives that will best fit the GPRS 11. Most of the CEA sector work (on forestry, land, and mining) falls under "Private Sector Competitiveness," which contains the objective (among others) o f "sustainable natural resource development." Health issues, insofar as they are related to mining and environmental protection, fall under the third objective o f the human resource development pillar (the second pillar). Furthermore, the support to artisanal sectors recommended by the CEA falls in line with one o f the second pillar's objectives o f protecting the rights o f vulnerable members o f society. The third pillar o f governance issues cuts across all three sectors.. 9. The CEA was prepared in parallel to the Multi Donor Budget Support (MDBS) group's preparationo f a new Joint Assistance Strategy to Ghana (G-JAS). The CEA provided inputto the Consultative Group meeting in June 2006 and thus to the discussions on the G-JAS and to the Performance Assessment Framework (PAF) for the implementation of the MDBS. For instance, the 2006 MDBFPAF includes two targets (numbers 22 and 23) for the forestry sector. Target 22, which reflects a specific recommendation o f the CEA (and i s also a trigger), intends to have put inplace a financial framework and policy to secure (i) revenue and Forestry Commission forest (FC) budget release for its core functions, (ii)transparency and accountability in financial management, and (iii) collection and distribution o frevenue to stakeholders. Target 23 consists o f continuing the implementation of the GoG's strategy for the management o f forestry resources to (i) twocompetitivebiddingeventstoallocatenewTimberUtilizationContracts(TUCs), conduct (ii)convert existing timber leasesintoTUCs, and (iii)design and implement a logtracking -171- system. Furthermore, the MDBS PAF includes target 24, which would strengthen coordination and consistency of policymaking and implementation on cross-cutting environmental issues by developing an operational inter-ministerial governancemechanism. 10. The inclusion of these forestry and environmental governance targets inthe 2006 MDBS PAF was not exclusively due to the CEA. However, the CEA played an important part in their presence in the MDBS: the strong anchoring o f the CEA analysis in the G-JAS and the MDBS decisively has brought the issue of natural resource and environmental management and governance onthe GoG agenda. 11. Like the MDBS more broadly, the PRSCs in Ghana have always articulated the GPRS priorities, and PRSC IV was specifically focused around three key development results parallel to the GPRS I1pillars: higher growth and employment generation, improved service provision for human development, and stronger governance and public sector management. Influenced by the analysis conducted in the CEA, PRSC IV recognized that strengthening the management o f natural resources and the environment would be one of the key drivers to achieving sustainable growth. Therefore, the MDBS forestry target 23 mentioned above, which was a specific recommendation of the CEA, was also included in the PRSC IV as its trigger for the forestry sector. 12. Following the PRSC IV, it had been further recommended that there be a future trigger linkedto a financial agreementbetween the MOFEP, MLFM, and the Forestry Commission (FC) that would establish secure, predictable financing for the FC. Consequently, target 22 from the 2006 MDBS PAF was also included in the 2006 PRSC V such that a financial and policy framework for the FC would be developed. It shouldbe notedthat future MDBSPRSCs will have only one, joint PAF for the sake of simplicity. B. ExistingSector InvestmentProjects 13. Giventhe stretching mandate and increasing responsibility that i s being placed on country institutions, a range of DPs felt that additional instruments were needed to support country systems for the environment beyond general budgetary support alone. Budget support can and may be enhancedby the use o f other fundingmechanisms. Some o f the proposed CEA actions are therefore inthe process of being implemented through a set of investment projects. Some of the sector-specific interventions are outlinedbelow. Forestry and Wildlife 14. There exist a handful of programs financed by DPs related to forestry and wildlife, many of which have almost reached completion. From the RNE, there i s an approximately U S 1 5 millionWildlife Program, a US$17 millionWildfire Management Program, and a US$0.5 million Validation of Legal Timber Project, all of which have a closing date o f December 2007. Additionally, the Fonds Franqais pour 1'Environnement Mondial (FFEM) i s financing a US$1.7 million biodiversity and forestry project in Ghana. This project is linked to the US$12 million PADP (Protected Areas DevelopmentProgram) funded by the EC, which started in2006 and will end in 2009. The GEF-funded Northern Savanna Biodiversity Conservation Project, with a total budget of about US$8 million, will end in December 2007. Meanwhile, Switzerland i s funding (or preparing to fund) several smaller projects in the forestry sector for a total o f approximately US$1.5 million; these include a program on processing and utilization of trees on farmlands and logging residues through collaboration with local communities via the International Timber Trade Organisation (ITTO), a project on quality control and standardization o f Ghanaian wood products, and a project in support of standard setting for Allanblackia trade and of sustainable supply chainmanagement.However, few ofthese programs will continue past 2007. -172- 15. In view of the reforms needed to strengthen the sector's institutional capacity, overall donor aid to the sector does not seem adequate to improve present reforestation programs. Furthermore, the large number of donors in the sector indicates that the government will have a high transaction cost from coordinating and implementing donor assistance. The sector will thus benefit from the multidonor-supported NREGProgram, as it harmonizes the DP financing into one large budget support program. Mining 16. Development assistance committed for the miningsector (around U S 2 5 million) over the next three years i s adequate to cover the implementation of the CEA findings o f the mining sector. The main donor in the sector, the EC, has agreed to incorporate the CEA recommendations in its Mining Sector Support Program (US$ 45 million from 2003 - 2010). A key component of the program is the strengthening of the miningagencies' institutional capacity as well as the execution o f an Environmental Impact Assessment and a national Strategic Environmental Analysis project. This project would also provide sufficient funding to implement a comprehensive framework for compensation, post-closure rehabilitation, and benefit sharing. The EC program does not, however, include any fundingfor aprogram insupport o f artisanal and small-scale mining(ASM). Land Resources 17. New GEF resources (about US$ 7 million) will be channelled through the TerrAfrica SIP to strategically and complementarily support GoG in its efforts to achieve the targets and objectives inthe area o f SLMboth inthe agriculture sector and inthe ENRMsector. Inaddition, further resources (ie US$ 50-60,000) from the TerrAfrica Trust Leverage Fundand the World Bank Development Grant Facility) may be made available to support the Government in achieving specific targets on SLM. 18. With the exclusion of the land administration component (which is being implemented through the Land Administration Project), the existing financing envelope for SLM appears largely inadequate for the scale and scope of the interventions needed to scale up sustainable land management inthe country, particularly takinginto consideration the large scale o f on-the-ground investments needed. UrbanEnvironment 19. The World Bank is the only multilateral donor active in the urban water, sanitation, and waste management sectors. Bilateral participation i s limitedto a few countries, most notably the Dutch and Spanish governments. In addition, some assistance for institutional strengthening for urban waste management is provided by the Nordic Development Fund. The World Bank has been engaged in an Urban Water project since 2004, which includes a major capacity building element aimedat strengthening the GWCL operations through a management contract. 20. In the sanitation sector, an Urban Environmental Sanitation Program (UESP) ran from 1996to 2003, financed by the World Bank, some components are still active. A second project, UESP-2, began in 2004; it comprises the five largest towns in Ghana and focuses on upgrading infrastructure. The MLGRD implements the institutional-strengthening component o f the program. Inaddition, the Netherlands and Denmark have supported the sanitation directorate and the development o f a revised sanitation policy since the end of 2006. Natural Resources and Environment 21. A few ongoing DP projects deal with naturalresourcesand environmentalprotection more generally. For instance, a US$l million Community-Based Integrated Natural Resource Management, funded by GEF, will reach completion at the end o f 2007. RNE also supports the -173- US$1.3 million Ghana Environmental Assessment Support Programme, which will close inMay 2008. Furthermore, a total of approximately US$4.5 million of the World Bank Community- BasedRural Development Project will be usedfor an NREcomponent. C. NREGSector Budget Support 22. In addition to the general budget support from the MDBSPRSC and the individual investment projects in the NRE sectors outline above, the creation of a multi-donor natural resources and environmental governance sector budget support became a specific request of GoG after the results of the CEA and other analytical studies were made available. The resultant NREG Program will concentrate on the forestry and wildlife, mining, and environment sectors, and will also address cross-sectoral issues. DPs have made tentative commitments to the NREG Programof about US$20 millionperyear, althoughthis amount i s subject to change. 23. Although some aspects of the CEA recommendations are currently beingfinanced or will be financed in the near future through the NREG Program, the GoG should explore further opportunities for financing. Opportunities for donor assistance also exist to bolster already- existing initiatives. -174- Appendix 1. Methodology for Evaluating the Costs of Natural Resource and Environmental Degradation'" I.Introduction This appendix provides an overview of how the decrease in total social welfare from resource depletion and environmental degradation has been valued in monetary terms. More specifically, this appendix estimatesthe economic costs ofreducedproductivity and damagedhumanhealth- or in other words, the lost direct use values derived from Ghana's natural assets. Indirect use values such as ecosystem services, option values from the potential future use o f the resource, and sheer existence values are not includedinthe following valuation. These direct-use costs were calculated by examining (i) the costs associated with product loss from depletion of and degradation to Ghana's principal growth-driving natural assets, namely agricultural lands and forest and savannawoodlands, and (ii) from the health costs o f outdoor and indoor air pollution and inadequate potable water supply, sanitation, and hygiene. A variety of differentvaluation methods were used, including the productivity loss approach, the replacement cost approach, the human capital approach (HCA), and the value of a statistical life (VSL) approach. Ultimately, the yearly value o f economic costs from environmental degradation i s determined to be US$730 million or approximately 9.6 percent of Ghana's GDP of US$7.62 billion in 2003. This does not mean that if degradation were to be reversed, the country would enjoy additional production worth this amount. Rather, framing the costs in these terms i s intended to provide a sense of the magnitude of the degradation, which may spur realization among policymakers and the wider public of the importance of natural resources and the environment. From this new and updated calculationo f costs, the genuine savings rate -an estimator of Ghana's true sustainability that accounts for reductioninnatural assets -can be evaluated. The magnitude o f these environmental costs and concurrent growth trends provides insight as to the sustainability of Ghana's current development path and brings much-needed attention to the importance o f sustainable management o f Ghana's environment and natural resources. It is important to note that inmany cases the data for Ghana are insufficient or non-existent, such that the calculations are very approximate and leave out certain costs that simply cannot be valued. Furthermore, the cost of depletion of other important natural resources - such as fisheries or wildlife depletion- are not includedinthe total costs. As such, the following analysis provides only a rough sketch o f the total costs of environmental and natural resource depletion. However, even such a ballpark figure can be useful to obtain a sense o f the magnitude o f the degradation at hand. Section I1 provides an overview o f how the costs o f product loss from damage to the two aforementioned natural resource sectors were calculated. The following section I11summarizes the calculations for the costs from mortality and morbidity due to environmental degradation. `I8 This appendix pools informationfromthe 2005 GhanaNaturalResourcesManagementand Growth Sustainability Economic and Sector Work (ESW) and the Ghana Cost o f Environmental Damage study (2006, BjornLarsen). -175- Finally, section IV analyzes the total costs estimated in sections I1and I11and their implications for Ghana's genuine savings rate. 11.LostProductivityfromDamageto NaturalResources The following analysis focuses only on the costs associated with the productivity of Ghana's natural assets, not with the ecosystem services they provide. Inother words, the loss of services resulting from natural resource depletion - which include water purification, carbon sequestration, nutrient cycling, and recreational uses - are not included in the final valuation of costs. Rather, the following analysis values the costs o f overexploiting two of Ghana's most productive naturalresource sectors: forests and agricultural soil. By focusing on products, and not services, the costs of depletion directly affect GDP growth in different ways. For instance, if the depletion i s calculated as a harvest over the Maximum Sustainable Yield (MSY) and the product market is formal, such as for timber, then the cost o f depletionrepresentsthe amount from which the sector contributionto GDP i s overestimated-the unsustainable part o f sector contribution to GDP. Conversely, if the depletion i s calculated as a lost production, such as for agriculture, the cost of depletion represents the potential additional sector contribution to GDP when productivity i s restored. i.Agriculturalland Two methods were used to value the costs of depletion to agricultural land: the productivity loss approach and the nutrient replacement cost approach. The productivity loss approach measures the costs of reduced crop productivity due to soil erosion, while the nutrient replacement cost approach estimates the damage from chemical erosion by valuing the nitrogen, phosphate, and potash (NPK) needed to replace lost nutrients.The costs to degradation o f pasture lands, or the costs o f compaction and acidification of agricultural soil, are not considered in this analysis due to lack of data. The final estimate of costs o f soil degradation i s US$135 millionper year in2003 prices (or 1.6 percent of GDP), which was computed by finding the arithmetic average of the lowest estimates generated by the two approaches. The calculations generated for each method are outlined below. Productivity loss approach The underlying assumption o f the productivity loss approach in assessing costs of soil degradation i s that the on-site cost of soil erosion damage i s equal to the lost crop production at market prices. Alternatively, it i s the difference in crop yields with and without erosion, multipliedby the unit price of crop, less the costs of production. Inthe absence of total land use by groupings inthe regions, the focus is on landuse as aresult of cropping activities (soil erosion and crop production). Several pieces of technical information and relationships are needed to assess costs of soil erosion. The sources from which these are drawn are both formal (official secondary data sources) and informal (information based on expert opinion). Key information used in assessing costs of soil erosion is: (i)quantity o f soil lost as a result of cropping activities by regions and agro-ecological zones; (ii) nutrient (NPK) content of soil loss by agro-ecological zones, (iii) market price of NPK; (iv) total land area (TLA) and total cropped area by regions and agro- ecological zones (LA& (v) other technical parameters such as marginal crop yield loss per cumulative tons of soil loss per hectare and a Crop Management Factor ("C-factor"). This latter parameter, known as the C-factor, i s the ratio of soil loss under a given crop to soil loss from bare cultivated soil; it effectively measures the combined effect of all the interrelated cover and managementvariables. -176- First,the regional soil loss per unit area is computed for eachcrop type (specifically: leguminous crops, and cassava and mai~e''~). This is the product of: the potential soil loss (PSL) per region (which i s a function o f the soil type particular to each region, namely forest, transition, interior savanna and coastal savanna), the Crop Management Factor, and the fraction of total land for each crop. Formally: t h a of soil loss = [CLAi /TLA] x PSLix C-Factori Note that the estimates o f potential soil losses are based on the Universal Soil Loss Equation (USLE)'" - a widely-used empirical model which estimates the average annual rate of soil erosion - on bare uncultivated soils and are derived from GIS imagery with additional field observations. Local data was used, when available, for each of the variables inthe equation.'" The crop productivity loss per hectare (resulting from the soil loss, calculated above) is then computed. This i s the product of the soil loss per hectare and the marginal yield loss (MYL). Three different values o f the MYLare used(inthree different scenarios, one for each value of the MYL), as prior studies from Ghana, Nigeria, and Vietnam yielded different results for the MYL. Scenario 1 uses a low value of MYL and Scenario 3 uses a (relatively) highvalue arising from a muchhigher cassava MYLfrom the Ghana study.122 Formally: kgha o f crop loss =(tha of soil loss) x (MYLo f that crop) The total crop productivity loss i s simplythe crop productivity loss (kgha) multipliedby the total cultivated area o f each crop. The total value of the productivity loss for each crop i s then the wholesale price of each crop (cediskg) multipliedby the total kilos of crop lost. Finally, the total value i s added up for each crop over all regions, yielding the total value in crop productivity lost over all the regions. The Total Value o f Crop Lost in Scenario 2 and 3 are $786.086 billion and $8005.56 billion, respectively. Usingan average interbank cedi/US dollar exchangerate of 8,677.81 in2003 (when these calculations were carried out), these lost values are US$80.97 million, US$90.59 million, and US$922.53 million, respectively. The table below summarizes the total value o f crop lost (in US$per year) for each scenario. '19The areas under cocoa for less than four years are included inthis mix 120The USLE equation is the following: potential soil lost (intons/unit aredyear) =R K LS C P, * * * * where R, K, L, S, C, and P are empirical factors representing the effects o frainfall, soil erodibility, slope length and steepness, crop management factor, and conservation practices, respectively (Jones et al.) 12'For maximumaccuracy, the parameters o fthe USLE, as well as the variables, should reflect the Ghanaian situation, but estimating a Ghana-specific USLE is a significant project initselfand i s a task for further research. -177- Total Soil Lost Total Value of Total Value o f Total Value o f per ha (from Crop Lost (US$) Crop Lost (US$) Crop Lost (US$) equation 1) Scenario 1 Scenario 2 Scenario 3 Total 70.5307 80,971,300 90,585,702 922331,983 It is useful to state the value of the productivity loss as a percent of GDP for comparative purposes. For each scenario, the percentage of GDP i s 1.08 percent, 1.21 percent, and 12.3 percent, respectively. While the study has no data to discount the high marginal cassava yield- soil loss parameter usedin scenario 3, the 12.3 percent o f GDP loss in a year resulting from soil loss on cropped land appears excessive. Ultimately, the lowest estimate from this approach (US$80 million) was averaged with the nutrientreplacement cost to yield the final calculation of costs o f damages to agricultural land. Nutrient Replacement CostApproach The replacement cost approach calculates the cost that would be incurred in order to replace a damaged asset. In terms o f crop loss from soil erosion, the damaged assets include nutrient and herbicidelosses.The underlyingassumption o fthis approach is basedon the principle that on-site cost of soil erosion damage i s equal to the value of nutrient lost per tons of eroded soil interms of fertilizers valued at market prices. A few pieces of information are necessaryto calculate the nutrientreplacement cost. The soil loss per ago-ecological zone has already been computed above (see equation 1). Using this information, the nutrient contents in the eroded soil (nitrogen, phosphate, and potash) are then converted to the forms in which they exist in fertilizers (N, P20s, K20) by multiplying by constants: KgP/ha x 2.29 - - kgP205/ha KgWha x 1.2 - kgK20/ha KgN/ha - kgN/ha The assumption here is that the form of NPK inthe eroded soil is the same as inthe compound fertilizer. It i s further assumedthat the NPK lost is, inthe conventional fertilizer standards, inthe form of 15-15-15 - that i s to say, a bag of fertilizer contains 15 percent N, 15 percent K, and 15 percent K.A 50 kg bag o f fertilizer then contains 7.5 kg o f N,7.5 kg o f P and 7.5 kg o f K with a total amount of nutrients inthe bag o f 22.5 kgNPK.This can be used as a conversionfactor: 22.5 kg NPK / 50 kg fertilizer yields .45 kg NPK / kg fertilizer. So the total amount o f nutrients lost per hectare has a corresponding amount of Z kg of fertilizer "lost" per hectare, which can be found using this conversion factor. One ton per hectare of soil lost has a corresponding Z lost kg of fertilizer (or more precisely, nutrient-lost-equivalent kgo f fertilizer). MultiplyingZ by the tons o f soil lost, summing over all the zones, and multiplyingby the market price of fertilizer yields the total value o fnutrientlost due to soil degradation. -178- Table2: The Value ofNutrientLoss inTerms ofNPK,2003 A. B. C. D. E. F. Agro- Computed Total Area No. o f 50 Value of NPK needed Value of Ecological Soil Loss Cropped kgbags to replace lost NPKneeded Zone tiha (ha) of NPK nutrients(inbillions o f to replace lost per cedis): lost nutrients ton of B C* D*(Price of 50 * (inUS$): soil kgNPKbags) = E/8,677.8 1 lostiha ~~150.0002003 in Forest 0.08974 1,669,521.6 5.785 130.008 14,981,751 Transition 1A227 522,822.4 4.002 573.3 66,065,055 Interior 1.5316 1,5 18,900 837.352 96,512,829 Savanna Coastal 0.12243 24050 Savanna costs I I From Table 2, the costs o f NPK lost as a result o f erosion-driven soil loss on cropped land in 2003 are estimated as # 1542.3075 billion. Usingthe average interbank cedi/US dollar exchange rate of 8,677.81 in2003, the lost value i s US$177.73 million. Overall soil degradation cost The central estimate is that Ghana loses approximately $1,170 billion or US$135 million each year, or 1.7 percent of GDP, to soil erosion as a result o f current farmingpractices. As mentioned above, this i s an average from the lowest estimates generated by the productivity loss and replacement cost methodologies used to assess the cost of soil erosion as a result of crop production. The 1.7 percent o f GDP estimate for the cost of soil degradation i s somewhat conservative as it only captures one aspect of soil degradation: water erosion, and only that for crop land. Erosion from wind, damage to soil structure (e.g., compaction), and chemical balance (e.g., acidification) impose significant on-site economic costs- (see Scher, 1999), but these have been ignored due to lack o f data. The economic cost of degradation o f pasture lands i s also excluded. ii.TimberDepletion The cost of timber depletion can easily and accurately be determined using the timber rent. Although this cost will vary according to the species and the year of extraction, general assumptions can be made to come up with an indicative cost of depletion for a given year. Inso doing, it i s assumedthat this timber rent value i s generally applicable across all forest species. In forestry economics, economic rent is widely referred to as the stumpage value: the international timber price minus all factor costs incurred in extraction, including a normal return to capital but not taxes and royalties. For example, if one cubic meter o f timber can be sold for US$20 and costs a total of US$12 to cut and bringto market, a rent o f US$8 would be assignedto each cubic meter o f timber. Under ideal market conditions, this stumpage value o f US$8/m3 would be equivalent to the present value of the expected hture net income that one cubic meter of timber would yield. Thus, the stumpage value would be the maximum amount concessionaires would pay for harvesting rights (Repetto et al., 1989). However, since the rent capture rates are very low in Ghana, stumpage value must be estimated by subtracting costs of extraction and transportation from the export value of timber (Baytas and Rezvani, 2003). The export price i s -179- measured by the free on board (FOB) export unitvalue, which i s the ratio of gross export revenue to the volume of log exports. One problem with this calculation i s that the export value of round- timber, for example, does not exist since the export ban in 1996. At this time, all round-timber were limited to the domestic market. In such cases, import parity of round logs and domestic maximum willingness to pay are calculated. This means that even if log exports are banned, mill gate prices for logs assume internationally competitive log prices at the farthest point domestic logs can reach and the maximum price domestic millers are willing to pay with the log ban in place. The timber rent calculated under internationalcompetition i s US$102/m3(see Table 3). Formally, the formulas for calculatingthe cost o f depletion are as follow: Timber rent for timberlogs=(US$/m3) -(all extractionandtransport costdm') Cost o f depletion= (timberrent from (3)) x (volume above maximum sustainableyield) I Parity Table 3: EstimatingTimber RentinGhana (US$) pricing of timber, US$/m' 246.88 Exportationandtransport costs Ins. & freight 80.00 Porthank charges 8.34 TIDDcharges 3.60 Transporthandling 5.49 Transport to forest gate 24.00 HarvestingAoading cost (From ITTO study) 7.92 Social responsibility costs (nonstatutory) 8.00 Forest operators margin 7.50 Timber rent =price-all exportation& US$102.03 transport costs -180- generated enough data to be included in the calculation, other important natural assets were not included, and none of the ecosystem services providedby the resourceswere assessed. The cost of depletion for these two natural assets is highinboth GDP terms and in its effect on the livelihood of the population. The large majority of this cost threatens growth sustainability because associated flows o f products and services come from the natural capital itself and not its sustainable yield. This section has valued the costs of natural resource degradation in Ghana; the following section examines the health costs associatedenvironmental degradation. 11.HealthCostsfromEnvironmentalDegradation This section values the annual economic costs of morbidity and mortality in Ghana due to urban air pollution from particulate matter, indoor air pollution, and inadequate potable water supply, sanitation, and hygiene. A distinctionbetween financial and economic costs should be made here: whereas financial costs capture only lost value interms o f nominal market prices, economic costs represent the real underlying cost to society o f environmental degradation and the resultant impacts on public health. The mean estimated annual cost of environmental health effects i s presented in Figure 2.1, totaling nearly 3000 billion Cedi per year (US $330 million).'23 The highest cost is from inadequate water supply, sanitation and hygiene (1620 billion Cedi), followed by indoor air pollution(1040 billion Cedi) and urban outdoor air pollution(270 billion Cedi). i.Outdoorairpollution There i s substantial research evidence from around the world that outdoor urban air pollutionhas significant negative impacts on public health and results inpremature deaths, chronic bronchitis, and respiratory disorders. The air pollutant that has shown the strongest association with these health endpoints i s particulate matter (PM)'24,and especially particulates of less than 10 microns indiameter (PM 10) or smaller. Researchinthe UnitedStates inthe 1990sandmorerecently by Pope et a1 (2002) provides strong evidence that it i s even smaller particulates (PM 2.5) that have the largest health effects. The gaseous pollutants (SO2,NOx, CO, and ozone) are generally not thought to be as damaging as particulates. However, SO2and NOx may have important health consequencesbecausethey can react with other substances inthe atmosphere to form particulates. The focus of this section is the health effects of fine particulate matter (PM10 and PM2.5). There are three mainsteps to quantifying the healthimpacts from air pollution. First, the pollutant needs to be identified and its ambient concentration measured. Second, the number o fpeople exposed to that pollutant and its concentration needs to be calculated. Third, the health impacts from this exposure should be estimated based on epidemiological assessments. Once the health impacts are quantified, the value o f this damage can be estimated. Baseline Data About 45 percent or 9.5 millionpeople live inurban areas inGhana (World Bank 2005), o f which an estimated 3.5 million live incities with more than 90,000 inhabitants. The population in Greater Accra alone is more than 2 million. Estimatedcost o f urban air pollution i s for the cities with more than 90 thousand inhabitants. Ambientmonitoring data ofPM 10 from 21 sites inAccra duringthe period ofDecember 2002 to July 2003 was usedto calculate the baseline. P M 10 concentrations range from 45 to 115 ug/m3, lZ3Using an exchange rate of 8900 Cediper US dollar as ofDec 31,2004. lZ4 calledsuspendedparticulates. Also -181- with an arithmetic meano fabout 80 ug/m3.An annual average o f 80 ug/m3is therefore appliedto estimate health effects, which i s a conservative estimate. Systematic monitoring data o f PM 10 are not available for cities other than Accra. Excluding them from estimation o f health effects o f PM would however represent a gross understatement o f health effects in Ghana. PM 10 levels in these cities could be higher or lower than in Accra depending on emission sources, climatic factors and city population densities. In the absence o f quantitative guidance as to the levels inthese cities, it i s assumed that populationweighted annual concentration level i s on average 80 ug/m3, or the same as applied to Accra. Annual average concentrations o f PM 2.5 and PM 10 applied to the cities in Ghana are presented inTable 12. A PM2.5PM 10 ratio o f 0.5 is used to convert PM 10to PM2.5 inthe absence of systematic PM 2.5 monitoring data, A lower threshold value o f 7.5 ug/m3of PM 2.5 i s applied, below which there i s insufficient evidence o f detectable health effects (WHO 2002b). The PM 2.5PM 10ratio o f 0.5 falls between the ratios observed inagricultural states and states with more industryandtraffic inthe United States. Thisratio is influencedby types o f emission sources and fugitive sources. Annual values PM 10concentrations (pg/m3) 80 PM2.5lPM 10ratio 0.5 PM2.5 concentrations (pg/m3) 40 Lower threshold value o f PM2.5 (pg/m3) 7.5 Dose Response Coeficients Based on the current status o f worldwide research, the risk ratios, or dose response coefficients from Pope et a1 (2002) are likely to be the best available evidence o f the mortality effects o f ambient particulate pollution (PM 2.5). These coefficients were applied by the WHO inthe World Health Report 2002, which provided a global estimate o f the health effects o f environmental risk factors. While the mortality effects are based on PM 2.5, the morbidity effects assessed in most worldwide studies are based on PM 10. Dose response coefficients from Ostro (1994) and Abbey et a1 (1995) have been applied for morbidity effects. Ostro (1994) reflects a review o f worldwide studies, and Abbey et a1 (1995) provides estimates o f chronic bronchitis associated with particulates (PM 10). The mortality and morbidity coefficients are presented inTable 15. Table 14: UrbanAir PollutionDose-ResponseCoefficients Source: Pope et a1 (2002) for the mortality coefficient. Ostro (1994) and Abbey et a1 (1995) for the morbidity coefficients. Pope et a1 (2002) utilized ambient air quality data from metropolitan areas across the United States for the two periods 1979-83 and 1999-2000, and information on certified causes o f -182- mortality of adults inthe American Cancer Society (ACS) database over aperiod of 16years. The ACS database contained individual-specific information for more than 1 million adults, which was obtained through questionnaires. The study could therefore control for a large set of factors that may also affect variations inmortality rates across metropolitan areas, such as age, smoking behavior, education, marital status, body weight, occupational riskfactors, and dietary indices. The study found a statistically significant relationship between levels o f P M 2.5 and mortality rates, controlling for all the factors discussedabove. All-cause mortality was found to increase by 4-6 percent for every 10 ug/m3 increase in P M 2.5. The increase in cardiopulmonary mortality was 6-9 percent, and 8-14 percent for lung cancer. No statistically significant relationship was found between levels o f P M2.5 and all other causes of mortality. The share of cardiopulmonaryand lung cancer deaths intotal mortality varies sometimes substantially across countries. Itmay therefore reasonably be expected that the riskratios for cardiopulmoriary and lungcancer mortalityprovide more reliable estimates of mortality from PM 2.5 than the riskratio for all-cause mortality when the riskratios are appliedto countries other than the UnitedStates. The mortality coefficient inTable 14 is therefore a combination o fthe cardiopulmonaryand lungcancer mortality riskratios inTable 15. Table 15: MortalityRiskAssociatedwith a 10 ug/m3Change inP M 2.5 Adjusted Relative RiskRatios (RR) Cause of Mortality 1979-1983 1999-2000 Average All-cause 1.04 1.06 1.06 Cardiopulmonary 1.06 1.08 1.09 Lungcancer 1.08 1.13 1.14 All other cause 1.01 1.01 1.01 Inorder to apply the mortality coefficient inTable 14 to estimate mortality from urban outdoor air pollution in Ghana, baseline data on cardiopulmonary and lung cancer deaths are required. The World Bank (2005) reports a crude mortality rate in Ghana o f 12.7 per 1000population, and WHO (2002a) reports that cardiopulmonary and lung cancer mortality in the age group over 30 years i s 15 percent o f total deaths (all ages) in the region to which Ghana be10ngs.l~~These mortality data were appliedto the cities inGhana. An estimate of annual incidence of chronic bronchitis (CB) i s required in order to apply the CB coefficient in Table 14. In the absence of CB incidence data for Ghana, chronic obstructive pulmonary disease (COPD) incidence for the West African region i s therefore applied to Ghana (WHO 2002a and Shibuya et a1 2001). The COPD rate i s converted to a rate for adults (population over 15 years of age) and it is assumedthat CB i s 90 percent of COPD. Rates Crude mortality rate per 1000population in2002 (World Bank2005) 12.7 Cardiopulmonary and Lung Cancer mortality (percent of crude mortality) (WHO 2002)* 15% Chronic Obstructive Pulmonary Disease incidence (per 100,000 population) (WHO 2002) 33 125Popeet al (2002) estimatesmortality from PM 2.5 for the age group over 30 years. Baseline mortality therefore needs to be for this age group. -183- Other morbidity health endpoints considered are hospital admissions of patients with respiratory problems, emergency room visits (or hospital out-patient visits), restricted activity lays, lower respiratory infections in children, and respiratory symptoms. These are the most common health endpoints considered in most of the worldwide studies on air pollution. The coefficients are expressedas cases per 100,000 inthe absence of incidence data for Ghana. It shouldbe noted that it would be preferable to have incidence data and use coefficients that reflect percentage change inincidence. Increasesinasthma attacks among asthmatics have also beenrelatedto air pollution in many studies. This however requires data on the percentage of the population that are asthmatic and frequency of asthma attacks, which i s not readily available for Ghana. The health effects o f air pollution can be converted to disability adjusted life years (DALYs) to facilitate a comparison to health effects from other environmental risk factors. DALY i s a commonly-used measure used to assess the overall impact of premature morbidity and mortality by unifyingthem into one single measure. DALYsper 10 thousand cases of various health end- points are presented inTable 17. Table 18 presents the disability weights and average duration o f illness that are used in this appendix to calculate the DALYs as presented in Table 17. The weights for lower respiratory illness (LRI) and chronic bronchitis (CB) are at the lower end o f values that have been applied in the literature. Disability weights for the other morbidity end- points are not readily available, and are estimatesby Larsen (2004a,b) based on weights for other comparable illnesses. Average duration of CB i s estimated based on age distribution in Ghana and age-specific CB incidence for the West African region in Shibuya et a1 (2001). Average duration of illness for the other health end-points i s from Larsen (2004a, b). Health Effect DALYslost per 10,000 cases Mortality 90,000 Chronic Bronchitis (adults) 20,000 Respiratoryhospital admissions 160 Emergency Roomvisits 45 Restrictedactivity days (adults) 3 Lower respiratory illness inchildren 65 Respiratory symptoms (adults) 0.75 Includes days o fhospitalization andrecovery period after hospitalization. EstimatedHealth Effects -184- Estimated annual health effects o f ambient particulate outdoor air pollution in Ghana are presented inTable 19. Urban air particulate pollution is estimated to cause nearly 1400premature deaths annually. Estimated new cases of chronic bronchitis are about 740 per year. Annual hospitalizations due to pollution are estimated at 3,300, and emergency room visits/outpatient hospitalizations at 65 thousand per year. Cases of less severe health impacts are also presented in Table 19. Interms of annual DALYslost, mortality accounts for an estimated 60 percent, chronic bronchitis around 7 percent, restricted activity days (RADS)for 14 percent, lower respiratory illness inchildren for 6 percent, and respiratory symptoms for 11percent. Table 19: EstimatedAnnualHealthEffectsofUrbanOutdoor Air Pollution Estimated Cost of Health Effects Two distinct methods o f valuation of mortality are commonly used by economists to estimate the social cost of premature death, Le., the human capital approach (HCA) and the value of statistical life (VSL). The first method was dominant in the past but has increasingly been replaced by the VSL approach in the last couple of decades. Inthis valuation, the HCA has been applied as a lower bound and VSL as a higher bound in estimating the cost of adult mortality. For child mortality, the HCA has beenapplied. HumanCapitalApproach The HCA is based on the economic contribution of an individual to society over the lifetime of the individual. Death involves an economic loss that i s approximated by the loss o f all future income of the individual. Future income i s discounted to reflect its value at the time o f death. The discount rate commonly applied i s the rate of time preference. Thus the social cost o f mortality, according to the HCA, i s the discounted future income o f an individual at the time o f death. Ifthe risk of death, or mortality risk, is evenly distributed across income groups, average expected future income i s applied to calculate the social cost of death. Mathematically, the present value o f future income i s expressedas follows: P (I) I,(1 g) /(1+ r)i v, = c i=n + i=k where PVo (I) i s the present value o f income (I) in year 0 (year of death), g i s annual growth in real income, and r i s the discount rate (rate o f time preference). As can be seen from the equation, the equation allows for income to start from year k and end inyear n.Inthe case of children, iis withing the 20 - 65 range, assuming the lifetime income on average starts at age 20 and ends at retirementat age 65. An annual growth of real income of 2 percent and a discount rate of 3 percent have been applied to Ghana inthis report. Several important issues are often raised regarding the HCA. The first issue concerns the applicationof this valuation approach to individuals that do not participate inthe economy, i.e., to individuals not having an income, such as the elderly, family members taking care o f the home, -185- and children. One may think of an extension of the HCA that recognizes the value o f non-paid household work at the same rate as the average income earner, or at a rate equal to the cost o f hiring a household helper. In this case, the HCA can be applied to the death of non-income earners and children (whether or not children will become income earners or take care o f the home during their adult life). Inthe case of the elderly, the HCA would not assign an economic value to old individuals that have either retired from the workforce or do not make significant contributionsto household work. This obviously is a serious shortcoming of the HCA approach. The secondissueregardingthe HCA is that the social cost ofmortality is limitedto the economic contribution of an individual, or value of household work ifthe individual takes care of the home. Alternative approaches to the valuation of mortality, or social cost o f mortality, have therefore been developed and increasingly been applied in the past couple o f decades. These approaches employ a concept or measure called the value of a statistical life (VSL), which nowadays i s much more widely usedinpublic policy than the HCA approach. The estimated cost ofmortality inGhanabasedonHCAis presentedinTable 21. Average annual income i s approximated by GDP per capita, corresponding to around 3.65 million Cedi per year in2004. The estimatesare fromthe equation above. Average Numberof Million Cedi Years Lost Adults: Mortality fromUrbanAir Pollution 9 33 Mortality from IndoorAir Pollution 7.5 27 Children: Mortality from Indoor Air Pollution 65 113 Mortality from Diarrheal Illness 65 113 Value of a StatisticalLife (VSL) Approach While the HCA involves valuation of the death of an individual, VSL i s based on valuation of mortality risk. Everyone in society i s constantly facing a certain risk o f dying. Examples of such risks are occupational fatality risk, risk of traffic accident fatality, and environmental mortality risks. It has been observed that individuals adjust their behavior and decisions inrelation to such risks. For instance, individuals demand a higher wage (a wage premium) for ajob that involves a higher than average occupational risk of fatal accident, individuals may purchase safety equipment to reduce the risk of death, andor individuals and families may be willing to pay a premium or higher rent for properties (land and buildings) in a cleaner and less polluted neighborhoodor city. Through the observation of individuals' choices and willingness to pay for reducingmortality risk (or minimumamounts that individuals require to accept a higher mortality risk), it i s possible to measure or estimate the value to society of reducing mortality risk, or, equivalently, measure the social cost of a particular mortality risk. For instance, it may be observed that a certain health hazard has a mortality risk o f 1/10 000. This means that one individual dies every year (on average) for every 10 000 individuals. Ifeach individual on average i s willing to pay 10,000 Cedi per year for eliminating this mortality risk, then every 10 000 individuals are collectively willing to pay 100 million Cedi per year. This amount i s the VSL. Mathematically it can be expressedas follows: VSL =WTPave * 11R -186- where WTPave is the average willingness-to-pay (Cedis per year) per individual for a mortality risk reduction of magnitude R. In the illustration above, R=1/10,000 (or R=O.OOOl) and WTPAve= 10,000 Cedi. Thus, if 10 individuals die each year from the health risk illustrated above, the cost to society i s 10* VSL = 10*100 million Cedi = 1billion Cedi . The main approaches to estimating VSL are through revealed preferences and statedpreferences. Most o f the studies of revealed preferences are hedonic wage studies, which estimate labor market wage differentials associatedwith differences in occupational mortality risk. Most o f the stated preference studies rely on contingent valuation methods (CVM), which in various forms ask individuals about their willingness-to-pay (WTP) for mortality risk reduction. Mrozek and Taylor (2002) provide a meta-analysis o f VSL estimates from labor market studies from around the world. They identify a "best-practice" sample and control for industry characteristics other than occupational mortality risk that also affect inter-industry wage differentials. The study concludes that a range for VSL of U S $1.5-2.5 million can be reasonably inferred from labor market studies when "best-practice" assumptions are invoked. It should be noted that the VSL range inferredby Mrozek and Taylor i s substantially lower than average VSL estimated in other meta-analysis studies. Some o f these studies identify a mean VSL on the order of U S $6 million. However, the contribution by Mrozek and Taylor to the meta-analysis literature i s their careful assessment of a large sample o f VSL estimates and inclusion of industry control variables to better assesswage differentials associatedwith mortality risk. However, there are no studies o f VSL conducted in Ghana. This implies that values have to be transferred from studies inother countries. The overwhelming majority of VSL studies have been conducted incountries with substantially higher income level than inGhana. VSL estimates from these countries must therefore be adjusted to Ghana. One commonly used approach in benefit transfer i s to apply income elasticities. Viscusi and Aldi (2002) estimate an income elasticity o f VSL inthe range of 0.5-0.6 from a large sample of VSL studies. The range inincome elasticity, however, i s influencedby three unusuallyhighestimates of VSL from labor market data from one state inIndia. Leavingout these three studiesprovides an income elasticity o f about 0.80. However, the most appropriate income elasticity to apply to middle-income countries, such as Ghana, remains uncertain. The reason for this i s that the income level in Ghana falls far outside the range of income in the sample of countries from which the income elasticities o f VSL i s estimated inthe empirical literature. A prudent approach might be to apply an elasticity of 1.O in order to reduce the riskof overstating the cost of mortality inGhana. Table 21: EstimatedValue of StatisticalLife in Ghana llHighll llLowll Source: Average VSL inhigh-income countries (million US $) I 2.5 1.5 IMrozek and Taylor Average GDPkapita inhigh-income countries (US $) 30 000 30 000 World Bank* GDP per capita inGhana (US $ in2004) 410 410 World Bank (2005) Income elasticity 1.o 1.o -187- Table 21 presents the VSL for Ghana from benefit transfer basedon the range o f VSL reported by Mrozek and Taylor (2002) and an income elasticity of 1.O. These figures are substantially higher than the ones fiom the HCA. Costs of Morbidity A measure of the welfare cost of morbidity is often based on the willingness-to-pay (WTP) to avoid or reduce the risk o f illness. This measure i s often found to be several times higher than the cost of medical treatment and the value of time losses (Cropper and Oates 1992), and reflect the value that individuals place on avoiding pain and discomfort. However, there i s not a sufficient number of WTP studies from Ghana. For this reason, the cost-of illness (COI) approach (mainly medical cost and value o f time losses) has been supplemented by a proxy for the cost o f pain and discomfort in this report. The proxy applied i s valuation of DALYs at GDP per capita. This i s included in the cost of morbidity in Table 22. Table 23 presents the estimated cost per case of mortality and illness (health endpoint). The figures in the column with total cost per case were applied to the estimated cases inTable 19 to arrive at the total annual costs inTable 22. Table 23 also presents disaggregated cost per case of illness (medical cost and time losses) and DALYs valued at GDP per capita. For most o f the health end-points, the cost of illness i s substantially higher than the proxy for pain and discomfort. The main exception is chronic bronchitis, which often has a severe effect on people's life without necessarily causing substantial medical treatment cost or time losses. I Healthcategories Table22: EstimatedAnnual Cost of HealthImpactsinbillionsof cedis I Totalannual cost* (millions US$) I Percent o f total cost* I TOTAL COST (Mortality and 125 -415 (13.9 -46) 100% morbidity) Table 23: EstimatedUnit Cost byHealthEnd-Point Health categories Total Cost Per Cost-of-Illness cost o f Per Case DALYsPer (000 Cedi) 1 (000 Cedi) Case 1 -188- Table 24 provides the baseline data that were usedto estimate the cost per case of illness. Some of these data require explanation. The value of time for adults is based on urban wages. Economists commonly apply a range of 50-100 percent of wage rates to reflect the value of time. The rate o f 13,000 Cedi per day is 75 percent of average urban wages in Ghana. This rate has beenapplied for bothincome earning and non-income earning individuals. There are two reasons for applying the rate to non-income earning individuals. First, most non-income earning adult individuals provide a household function that has a value. Second, there i s an opportunity cost to the time of non-income earning individuals, because they could choose to join the paid labor force. Table 24: BaselineDatafor Cost Estimation Baseline Source: CostDatafor All Health End-Points: Cost o f hospitalization (000 Cediper day) 150 Per consultations with Cost o f emergency visit (000 Cedi)- urban 40 medical service providers, Cost o fdoctor visit (000 Cedi) (mainly private doctors) andhealth authorities -urban 40 Value oftime lost to illness (000 Cediper day) 75% o furban wages in 13 Ghana Chronic Bronchitis (CB): Average duration o fIllness (years) 17 Based on Shibuya et a1 (2001) From Schulman et a1 (2001) andNiederman et a1 (1999) Estimatedbased on frequency o f doctor visits, emergency visits, and hospitalization Estimate Applied by WHO for health effects Estimates Estimated at 1-2 hours per dav There i s very little information about the frequency of doctor visits, emergency visits and hospitalizationfor CB patients inany country inthe world. Schulman et a1(2001) and Niederman et a1(1999) provide some information on this from the UnitedStates and Europe. Figures derived from these studies have been applied to Ghana. Estimated lost work days per year i s based on -189- frequency o f estimated medical treatment plus an additional 7 days for each hospitalization and one extra day for each doctor and emergency visit. These days are added to reflect time needed for recovery from illness. Figures derived from these studies have been applied to Ghana. Estimatedlost workdays per year are based on frequency o f estimated medical treatment plus an additional 7 days for each hospitalization and one extra day for each doctor and emergency visits. These days are added to reflect time needed for recovery from illness. To estimate the cost o f a new case o f CB, the medical cost and value o f time losses have been discounted over a 17-year average duration o f illness. An annual real increase o f 2 percent in medical cost and value o f time has been applied to reflect an average expected increase in annual labor productivity and real wages. The costs are discounted at 3 percent per year, a rate commonly appliedby WHO for health effects. Overall, the total estimated annual cost o f urban air pollution health effects i s presented inTable 25. Table25: AnnualCost ofUrbanOutdoor Air Pollutionfor ThreeScenarios Note: Accra does here not include Term and Teshie. Tema and Teshie are includedin "Other cities." Sensitivity Analysis As the annual average concentrations o f PM 10 in Accra and other cities are quite uncertain, a sensitivity analysis o f estimated annual cost o f PM pollution i s presented in Table 22. The base case, presented above, i s applying an annual level o f 80 ug/m3 o f PM 10 to all the cities inTable 3.1, The "lower" case applies 60 ug/m3 o f PM 10 to the cities other than Accra, and the "upper" case applies 100 ug/m3 o f PM 10 to Accra. The difference in annual cost in the three cases i s not very large, ranging from a mean estimate o f 235 to 300 billion Cedi. The highest cost estimate i s 460 billion Cedi, or 0.6 percent o f GDP, which reflects the use o f VSL for mortality valuation and 100 ug/m3 o f P M 10 in Accra. This i s still substantially below the estimated cost o f indoor air pollution or inadequate water supply, sanitation and hygiene. ii.WaterSupulv,Sanitation,andHygiene BaselineHealth Data Baseline health data for estimating the health effects o f inadequate water supply, sanitation and hygiene are presented in Table 26 below. The Global Burden o f Disease 2002 (WHO 2002b) indicates that 15 percent of under-5 child mortality could be from diarrheal illness inGhana. This i s the rate inthe West African region to which Ghana belongs, and is applied to an under-5 child mortality rate o f 83 per 1000 live births inurban areas and 105 inrural areas. -190- The urban and rural mortality rates are estimated for 2004 by adjusting the preceding 5 years' rural andurban mortality rates reported inthe Ghana DHS 2003 inproportion to the difference in the national rate from the Ghana Demographic Health Survey 2003 and the national rate in 2004 reportedby World Bank (2005). For diarrheal morbidity, it i s very difficult or practically impossibleto identifyall cases o f illness. The mainreason is that a substantial share of cases is not treated or does not requiretreatment at health facilities, and i s therefore never recorded. A second reason is that cases treated by private doctors or clinics are often not reported to public health authorities. Household surveys therefore provide the most reliable indicator o f total cases of diarrheal illness. Most household surveys, however, contain only information on diarrheal illness in children. Moreover, the surveys only reflect diarrheal prevalence at the time o f the survey. As there i s often highvariation in diarrheal prevalence across seasons o f the year, extrapolation to an annual average will result ineither an over- or underestimate of total annual cases. Correcting this bias i s often difficult without knowledge of seasonalvariations. The Ghana Demographic and Health Survey 2003 (DHS 2003) provides data on diarrheal prevalence inchildren under the age of five years. Itreports a diarrheal prevalence (preceding two weeks) rate of 16.1 percent in m a l areas and 13.6 percent in urban areas. This rate is used to estimate annual cases per child under-5, and then total annual cases in all children under-5. The procedure applied is to multiply the two-week prevalence rate by 52/2.5 to arrive at an approximation of the annual cases of per child. The Ghana DHS 2003 household survey does not (nor does any other household survey in Ghana) provide information on diarrheal illness in the population above 5 years o f age. International evidence indicates that diarrheal incidence in children under-5 i s on the order of 5 times higher than the incidence inthe population over 5 years of age (Larsen 2004a,b). Table 26 also presents DALYs per cases o f diarrheal illness, which are used to estimate the number of DALYs lost to inadequate water supply, sanitation and hygiene. The disability weight for diarrheal morbidity is 0.119 for children under-5 and 0.086 for the rest o f the population, and the duration of illness is assumed to be the same (i.e,, 4 days). However, the DALYs per 100 thousand cases of diarrheal illness are much higher for the population over 5 years o f age. This i s because DALY calculations involve age weighting that attaches a low weight to young children and a higher weight to adults that corresponds to physical and mental development stages. For diarrheal child mortality, the number o f DALYs i s 34. This reflects an annual discount rate o f 3 percent of life years lost. Urban Rural Source: Under-5 childmortality rate in2004 83 105 Adjusted from DHS 2003 to (per 1000 live births) reflect estimated national rate o f 95 in2004 Diarrheal mortality inchlldren under 5 years 15% * 15%* AFRO Dregion (WHO (percent of child mortality) 2002a) Diarrheal 2-week Prevalence in 13.6% 16.1% Ghana DHS 2003 Children under 5 years Estimatedannual diarrheal cases per child 2.8 3.3 Estimated from Ghana DHS under 5 years 2003 Estimatedannual diarrheal cases 0.55 0.65 Estimated from a perperson(>5years) combination of Ghana DHS -191- 2003 and international experience Percent o f diarrheal cases attributable to 90% 90% WHO (2002b) inadequate water supply, sanitationand hygiene DALYsper 100thousand cases ofdiarrhea 40 40 Estimated from WHO tables inchildrenunder 5 using age weighting and an DALYsper 100thousand cases of diarrhea 130 130 average duration o f illness inpersons>5 years o f4 days, and age weighting DALYsper case ofdiarrhealmortality 34 34 and 3 percent discount rate inchildrenunder5 for mortality Estimated Health Impactsfrom Inadequate Water, Sanitation and Hygiene Table 27 presents the estimated health effects from inadequate water, sanitation and hygiene. The estimates are based on the data inTable 24, taking into account the WHO estimate that 90 percent of diarrheal illness i s attributable to water, sanitation and hygiene. Although the overall rural population share in Ghana i s about 55 percent, estimated number o f cases o f diarrheal child mortality i s twice as high as in urban areas because the child population i s substantially higher and the child mortality rate i s somewhat higher inrural areas compared to urbanareas. The larger rural children population also explains why the estimated cases of diarrheal illness in children under-5 i s about the same as in the population over-5 inrural areas while the number o f cases i s very different inthe two age groups inurban areas. Table 27: EstimatedAnnual HealthEffectsfromWater, Sanitation, Hygiene EstimatedAnnual Cases Urban Rural Cases of Diarrheal illness Children (under the age o f 5 years) - increased mortality 2,617 5,633 Children (under the age o f 5 years) - increased morbidity 2,992,500 5,974,200 Population over 5 years o f age - increased morbidity 4,167,000 5,705,100 data inTables 24 - 26. More than 90 percent o f the DALYs are from diarrheal child mortality. DALYsfrom diarrheal illness (mortality andmorbidity) are presentedinTable 28, basedonthe Estimated Cost of Health Impacts Annual cost o f diarrheal mortality and morbidity from inadequate water, sanitation and hygiene i s estimated at 600 billion Cedis inurban areas and 1020 billion Cedis inrural areas (Table 29). The cost o f diarrheal child mortality i s based on the human capital approach (HCA) discussed above. The cost o f morbidity includes the cost o f illness (medical treatment, medicines, and value o f lost -192- time) and DALYs from morbidity valued at GDP per capita to reflect the cost o f reduced well- being associated with illness. Cost-of-illness i s presented in Table 30 for diarrheal morbidity. About 30-35 percent o f these costs are associatedwith the value o f time lost to illness (including care giving), and 65-70 percent are from cost of treatment andmedicines. EstimatedAnnual Cost (millionUS%) Urban Rural Mortality Childrenunder age 5 32.8 70.5 Morbidity Childrenunder age 5 17.2 24.1 PoDulationover aee 5 16.6 18.4 TOTAL ANNUAL COST 66.6 113.0 EstimatedAnnual Cost (millions US%) Urban Rural Cost o f medical treatments (doctors, hospitals, clinics) 9.4 11.3 Cost o fmedicines 11.1 15.9 Cost o ftime lost to illness 10.6 11.4 TOTAL ANNUAL COST 31.1 38.6 Baseline data for the cost estimates of morbidity are presented in Table 31. The percent of diarrheal cases in the age group older than 5 years treated at medical facilities i s estimated from percent o f treated cases among children (Ghana DHS 2003) and international experience (Larsen 2004a,b). Cost o f medical services reflects the cost o f private health care. This i s a better indication o f the economic cost of health services than public services, which often are subsidized. The value o f time for adults i s based on urban and rural wages. Economists commonly apply a range o f 50-100 percent of wage rates to reflect the value o f time. 75 percent o f urban and rural average wages inGhana are applied here. These rates for value o f time are applied to both income earning and non-income earning adults. There are two reasons for applying the rates to non- income earning adults. First, most non-income earning adults provide a household function that has a value. Second, there i s an opportunity cost to the time o f non-working individuals, because they could choose tojoin the paidlabor force. Urban Rural Source: Percent o f diarrheal cases treated at medical 36 21 Ghana DHS 2003 facilities (children < 5 years) Percentage o f cases with use o fpharmacy 18 21 Ghana DHS 2003 Percent o f diarrheal cases treated with ORS 47 35 Ghana DHS 2003 (children < 5 years) Percent o f diarrheal cases treated at medical 25 22 Estimated from a facilities (population > 5 years) and with medicines combination Ghana -193- I DHS 2003 and international experience Average Cost ofhealth services (Cedi per visit) 40,000 40,000 Per consultations with Average Cost ofmedicines for treatment 30,000 30,000 pharmacies, medical ofdiarrhea (Cedi) service providers, and Average cost of ORS per diarrheal I 14,000 I14,000 health authorities case inchildren (Cedi) Average duration of diarrheal illness indays 4 4 Assumption (children and adults) Hours per day of care giving per case of 2 2 Assumption diarrhea inchildren Hours per day lost to illness per case of 2 2 Assumption diarrhea inadults Value oftime for adults (care giving and illadults) I 1,610 I1,075 I 75% of urban and rural ~~ Cedihour wages inGhana Percent of diarrheal cases attributable to 90 90 (WHO 2002b) Inadequate water, sanitation andhygiene Estimatedannual cost of inadequate water supply, sanitation and hygiene totals about US$ 166 - 194 (1500-1750 billion Cedis) per year, with a mean of US$ 180 million (1620 billion Cedis) equivalent to 2.1 percent of GDP in 2004. The costs of each category are presented in Figure 1. Costs include mortality in children and morbidity in children and adults. The estimated cost of diarrheal under-5 child mortality i s more than the combined cost of morbidity in children and adults. Figure1:Annual Costsby Category (BillionCedi) I 1000 900 800 700 600 500 400 300 200 I00 0 Diarrhealchild mortality Diarrrheal morbidity Diarrrheal morbidity (children u5) (population over 5) Sensitivity Analysis The cost of child mortality representsmore than 50 percent of total estimated cost of inadequate water supply, sanitation and hygiene. There i s also uncertainty about the economic cost of medical treatment and medicines. A sensitivity analysis was therefore undertaken with respect to these issues. The base case, presented inTable 32, reflects a valuation of childmortality usingthe human capital approach (HCA) with an annual discount rate o f 3 percent and an income growth rate of 2 percent, and a cost o f treatment based on cost of medical visits and medicines of 40,000 and 30,000 Cedi respectively. A "lower" and "upper" case i s presented in Table 32 using lower and higher discount rates, income growth rates, and costs o f treatment. Estimated annual cost i s 45 percent lower in the "lower" case than inthe base case, and 80 percent higher inthe "upper" case than in the base case. Nearly 85 percent of the difference between the base case and the -194- "lower" or "upper" case i s from the change in child mortality valuation, and only 15 percent i s from the lower treatment costs applied. The estimated annual cost inthe "lower" case -ranging from 850-930 billion Cedis - i s still substantially higher than the cost of outdoor air pollution. It i s also substantially higher than the cost o f indoor air pollution when the same parameters for valuation of child mortality are applied to indoor air pollution. Thus the ranking of annual costs for the three environmentalhealthrisk factors i s unaffected bythe sensitivity analysis. Table32: Annual Cost ofInadequateWater, Sanitation andHygienefor ThreeScenarios Notes: "Growth" is per capita income growth applied to estimate lifetime income; "Discount rate" i s the annual discount rate applied to estimate the present value o f lifetime income; "Cost o f medical visit" is the economic cost o f health service provision; and "Cost o f medicines" is the economic cost o f medicines typically used for treatment o f diarrhea. The difference between "lo,", mean, and "high" annual cost reflect a diarrheal child mortality rate o f 13, 15 and 17percent o f total child mortality. iii.IndoorAirPollution There are two main steps in quantifying the health effects. First, the number of people or households exposed to pollution from solid fuels needs to be calculated, and the extent of pollution, or concentration, should ideally be measured. Second, the health impacts from this exposure should be estimated based on epidemiological assessments. Once the health impacts are quantified, the value of this damage can be estimated. According to the Ghana Demographic and Health Survey 2003 around 97 percent o f rural households and 81 percent o f urban households used fuel wood, charcoal, and coal products in 2003, constituting a major source of indoor air pollution and respiratory health risk. The cost o f indoor pollution i s estimated separately for the urban and ruralpopulations. Health RiskAssessment Desai et a1(2004) provides a review of research studies from around the world that have assessed the magnitude of health effects from indoor air pollution from solid fuels. The relative riskratios for acute respiratory illness (ARI) and chronic obstructive pulmonary disease (COPD) are presentedinTable 33. The risk ratios represent the risk o f illness for those who are exposed to indoor air pollution compared to the risk for those who are not exposed. The exact risk ratio depends on several factors such as concentration level of pollution inthe indoor environment and the amount o f time individuals are exposed to the pollution. A range o f "lowyyto "high" ratios i s therefore presented inTable 32 that reflects the reviewby Desai et a1(2004). Studies have also found linkages between indoor air pollution from traditional fuels and increased prevalence of tuberculosis and asthma. It i s also possible that indoor air pollutionfrom such fuels can cause an increase in ischaemic heart disease and other cardiopulmonary disorders. As discussed in the section on urban air pollution, Pope et a1 (2002) and others have found that the largest effect of urban fine particulate pollution on mortality i s for the cardiopulmonary disease -195- group. As indoor smoke from traditional fuels i s high in fine particulates, the effect on these diseases might be substantial. More research i s however required in order to draw a definite conclusionabout the linkage and magnitude of effect. Theriskratios inTable 33 have inthis reportbeenappliedto young childrenunder the age of five years (for ARI) and adult females (for ARI and COPD) to estimate the increase inmortality and morbidity associatedwith indoor air pollution. It i s these population groups who suffer the most from indoor air pollution. This i s because they spend much more o f their time at home, and/or more time cooking than older children and adult males. Relative RiskRatios "Low" "High" Acute Respiratory Illness (AN) 1.9 2.7 Chronic obstructive pulmonary disease (COPD) 2.3 4.8 Baseline Health Data Baseline data on ARI and COPD are neededto estimate the health effects of indoor air pollution from the riskratios inTable 33. These data are presented inTable 34, along with unit figures for disability adjusted life years (DALYs) lost to illness and mortality. Data on COPD mortality and especially morbidity incidence, according to international disease classifications, are not readily available for Ghana. Regional estimates from WHO (2002a) and Shibuya et a1 (2001) for the AFRO Dregion (to which Ghana belongs) are therefore applied. The national average two-week prevalence rate of ARI inchildren under 5 years from the Ghana Demographic and Health Survey (DHS) 2003 is used to estimate total annual cases of ARI inchildren under the age of five. The procedure applied i s to multiply the two-week prevalence rate by 52/3 to arrive at an approximation o fthe annual cases of ART per child. The Ghana DHS2003 household survey does not provide information on ARI inadults (nor does any other household survey in Ghana). International evidence indicates that ARI incidence in children under4 is on the order of five times higher than the incidence in the population over 5 years o f age (Larsen 2004a,b). For ARI morality in children under-5, the rate for the West Afkican region to which Ghana belongs i s applied, which i s 18 percent o f total under-5 child mortality. Table 34 also presents DALY per cases o f ARI and COPD, which are used to estimate the number of DALYs lost from indoor air pollution. The disability weight for ARI morbidity i s the same for children and adults (i.e., 0.28), and the duration o f illness i s assumedto be the same (i.e., 7 days). DALYs per 100 thousand cases of ARI is however much higher for adults. This i s because DALY calculations involve age weightingthat attaches a low weight to young children, and a higher weight to adults, that corresponds to physical and mental development stages. As above, the ARI child mortality the number o f DALYs lost is 34. This reflects an annual discount rate of 3 percent of life years lost. DALYs lost per case of COPD morbidity and mortality i s based on life-tables and age-specific incidence of onset o f COPD reported by Shibuya et a1 (2001) for the region. A disability weight o f 0.2 has been applied to COPDmorbidity, which i s on the lower end of weights commonly applied to COPD. A discount rate of 3 percent is applied to bothCOPDmorbidity and mortality. -196- Table34: BaselineDatafor EstimatingHealthImpacts Ghana DHS2003 andinternational Estimated from WHO tables and AFRO Dregion(WHO 2002a). Estimated Health Impacts Annual new cases of ARI and COPD morbidity and mortality (Di) from solid fuel smoke were estimated from the following equation: Di= PAR"D? (10) where: D? is baseline cases o f illness or mortality, i(estimated from the baseline data in Table 34), and PAR i s givenby: PAR = PP*(OR-l)/(PP*(OR-1)+1) (11) where: PP is the percentage o f population exposed to solid fuel smoke (81 percent o f the urban and 97 percent of rural population), and OR is the odds ratios (or relative riskratios) presented in Table 33. Child mortality and ARI morbidity in children from indoor air pollution i s more than twice as high in rural areas. For adult females the difference between rural and urban areas i s substantially less. Estimated Cost of Health Impacts Total annual cost o f indoor air pollution i s estimated at US$92 - 143 million (825-1285 billion Cedis), with a mean estimate of 1040 billion equivalent to nearly 1.4 percent o f GDP in 2004. Respiratory child mortality represents 63 percent of the cost, and acute respiratory illness (ARI) in children represents 21 percent. Chronic obstructive pulmonary disease (COPD) mortality in adult females accounts for 9 percent of the cost, and ARI and COPD morbidity inadult females i s 7 percent of cost. Treatment cost represents private sector health care services, as these are likely to better reflect economic cost. The percent o f ARI cases in the age group older than 5 years treated at medical -197- facilities i s estimated from percent of treated cases among children (Ghana DHS 2000) combined with international experience. Table35: EstimatedAnnualCostofIndoorAir Pollution(Urban areas) Table36: EstimatedAnnualCost ofIndoorAir Pollution(Rural areas) Estimated Annual Cost "Low" "High" Acute Respiratory Illness (ART): Children (underthe age o f 5 years) - increased mortality 396 529 Children (under the age o f 5 years) - increased morbidity 120 160 Adult females -increased morbidity 26 34 Chronic obstructivepulmonary disease (COPD): Adult females -increased mortality 9 108 Adult females -increased morbidity 7 10 TOTAL 558 841 Baseline data for the cost estimates o f morbidity are presented in Table 37. Treatment cost represents private sector health care services as these are likely to better reflect economic cost. Percent o f ART cases in the age group older than 5 years treated at medical facilities i s estimated from percent of treated cases among children (Ghana DHS 2000) combined with international experience. The value of time for adults i s 75 percent o f urban and rural average hourly wages. The rationale for valuation o f time was discussed in the section on water, sanitation and hygiene, and in the urban air pollution section. Baseline Source: Urban Rural Percent o f ARI cases treated at medical facilities 53% 40% Ghana DHS 2003 (children 5 years) Percentageo f cases with use o fpharmacy (children 23% 26% Ghana DHS 2003 <5 years Cost o fmedicines for treatment o f acute respiratory 50,000 50,000 Per consultations with illness (population < 5 years) (Cedi) pharmacies Percent o fARI cases treated at medical facilities 52% 52% Estimatedfroma (females >30 years) combination o fthe Ghana DHS2003 and -198- international experience Cost o f medicines for treatment of acute respiratory 50,000 50,000 Per consultations with illness (females > 30 years) (Cedi) pharmacies Percent of COPD patients being hospitalizedper year 1.5 1.5 Assumption based on Percent o f COPD patients with an emergency 15 15 Schulman et a1(2001) and doctorhospital outpatient visits per year Niederman et a1(1999) Average number o f doctor visits per COPD patient 1 1 per year Estimatedlost workdays (including household work 2.6 2.6 Estimatedbased on days) per year per COPD patient frequency o f doctor visits, emergency visits, and harmacies, medical There is very little information about the frequency of doctor visits, emergency visits and hospitalization for COPD patients in any country in the world. Schulman et a1 (2001) and Niederman et a1 (1999) provide some information on this from the United States and Europe. Figures derived from these studies are applied to Ghana in this report. Estimated lost workdays per year is based on frequency o f estimated medical treatment plus an additional 7 days for each hospitalization and one extra day for each doctor and emergency visit. These days are added to reflect time neededfor recovery from illness. To estimate the cost of a new case of COPD, the medical cost and value of time losses have been discounted over a 17-year duration of illness. An annual real increase of 2 percent inmedical cost and value o f time has been applied to reflect an average expected increase in annual labor productivity and real wages. The costs are discounted at 3 percent per year, a rate commonly applied by WHO for healtheffects. Sensitivity Analysis Cost of child mortality representsnearly 40 percent of total estimated cost of indoor air pollution. There i s also uncertainty about the economic cost o f medical treatment and medicines. A sensitivity analysis was therefore undertaken with respect to these issues. The base case, presented in Table 38, reflects a valuation of child mortality using the HCA approach with an annual discount rate of 3 percent and an income growth rate of 2 percent, and a cost of treatment based on cost of medical visits andmedicines of 40,000 and 50,000 Cedis respectively. A "lower" and "upper" case are presented inTable 38 usinglower and higher discount rates, income growth rates, and costs of treatment. Estimatedannual cost i s 45 percent lower inthe "lower" case than in the base case, and more than 80 percent higher inthe "upper" case than inthe base case. About 90 percent of the difference between the base case and the "lower" or "upper" case i s from the change inchild mortality valuation, and 10percent i s from the lower treatment costs applied. The -199- estimated annual cost in the "lower" case -- ranging from 420-740 billion Cedi -- i s still higher than the cost of outdoor air pollution. Thus the ranking of annual costs for the three environmental health risk factors (water supply, sanitation and hygiene; indoor air pollution; and outdoor air pollution) i s unaffected by the sensitivity analysis. Annual cost (millions US$) Child mortality Cost of treatment($) "Low" "Mean" "High" valuation(HCA) "Lower" Growth= 1% Cost ofmedicalvisit = 3.33 47 63 a2 case Discountrate= Cost ofmedicines=4.44 5% Basecase Growth= 2% Cost ofmedicalvisit =4.44 92 115 143 Discountrate= Cost ofmedicines=5.55 3% "Upper" Growth= 2% Cost ofmedical visit = 5.55 173 212 253 case Discountrate= Cost ofmedicines= 6.66 iv. Total Costs from Outdoor and Indoor Air Pollution. Inadeauate Water Sumly, Sanitation. and Hvgiene The mean estimated annual cost of environmental health effects, summing up the costs of the above sections, totals nearly U S $325 million (nearly 4.3 percent of 2003 GDP). The highest cost i s from inadequate water supply, sanitation and hygiene (US$ 180 million, or about 2.4 percent o f GDP), followed by indoor air pollution (US$ 115 million, about 1.5 percent of GDP) and urban outdoor air pollution (US$ 30 million, or 0.4 percent of GDP). Figure 2 below illustrates the relative share of costs by environmentalcategory. The costs of environmental damage are distributedunevenly across the population. Estimated cost o f urban air pollution i s for the cities with more than 90 thousand inhabitants. The cost per person inthese cities i s estimated at nearly 80,000 Cedi (US$9) per year. Hygiene practices, and to some extent inadequatepotable water supply and sanitation, affect most of the population (both rural and urban), causing unnecessarydiarrheal illness and childmortality with an annual cost o f also nearly 80,000 (US$9) Cedi per person per year. Indoor air pollution from solid fuels i s a burden on the whole population, with an estimated cost of 55,000 Cedi (US$ 6) per person per year. So while the total annual cost of urban air pollution is substantially less than the total cost of the other two major environmental health risks, the cost per person exposed i s as high as for water, sanitation and hygiene alone. Urban-Rural Cost The cost of environmental health effects in urban areas i s estimated at roughly US$135 million per year, while the cost in rural areas i s estimated at about US$190 million. In relation to the urban-rural population share o f 45 and 55 percent, the estimated cost inrural areas i s 15 percent higher than in urban areas. For health effects from inadequate water supply, sanitation and hygiene, and indoor air pollution, the rural cost i s substantially higher than the urban cost. The primary reason for this i s higher child mortality and morbidity inrural areas, and a substantially higher child population share in rural areas (children bear a disproportionate burden o f health effects from theserisk factors). The disproportionate burden o f health effects in the rural population from water, sanitation and hygiene, and indoor air pollution i s illustrated inFigure 2 below. The cost per capita from these two health risks is 30-40 percent higher in rural areas than in urban areas. This is womsome -200- because the rural population i s generally much poorer than the urban population and therefore in a worse position to cope with illhealth. The disproportionate burdenon the ruralpopulation i s to a large extent associated with higher child mortality from diarrheal illness resulting from inadequate water supply, sanitation and hygiene, and from respiratory illness stemming from indoor air pollution. Figure2: EstimatedAnnual Cost per PersonExposed(in thousandsof cedis) 100 1 I . 90 80 70 60 50 40 30 20 10 0 Outdoor air pollution Water supply, sanitation and Indoor air pollution hygiene IUrbanIRural Source: Larsen (2006) A "low" and "high" estimate of annual cost is presentedinTable 39. The range for water supply, sanitation and hygiene i s from uncertainties o f diarrheal child mortality rate. The range for urban outdoor air pollution i s mainly from the use of two valuation techniques to estimate the social cost of premature mortality. The range for indoor air pollution i s mainly from uncertainty o f exposure level to indoor smoke from solid fuels, and thus a range was applied for the level o f healthrisk. Environmental Millions ofUS$ categories "LOW" (HCA) approach Mean estimate "High" (VSL) approach Water supply, sanitation, 166 180 194 and hygiene Indoor air pollution 92 115 143 Outdoor air pollution 14 30 46 Total annual cost 271 325 382 The cost of environmental health effects inurban areas is estimated at US$135 million per year while the cost in rural areas is estimated at US$190 million. In relation to the urban-rural population share of 45 and 55 percent, the estimated cost inrural areas i s 15 percent higher than in urban areas. For health effects from inadequate water supply, sanitation and hygiene, and indoor air pollution, the rural cost is substantially higher than the urban cost. This i s mainly because of higher child mortality and morbidity in rural areas, and a substantially higher child population share in rural areas (children bear a disproportionate burden o f health effects from these risk factors). The disproportionate burden on the rural population i s to a large extent associated with higher child mortality from diarrheal illness from inadequate water supply, sanitation and hygiene, and from respiratory illness from indoor air pollution. -201- 111.Analysisofresults From section 11, we roughly calculated the aggregate annual costs of natural resource and environmental degradation at US$730 million: US$325 million from environmental health costs, and US$405 million from natural asset degradation. Figure 3: Costs of NRE Degradation 300 250 g 200 3 --= { 150 I- I- 100 50 0 Water & Outdoor air Indoor air Agricultural Timber Sanitation pollution pollution Land Note that this does not mean that Ghana could produce US$730 millions' worth o f additional output if depletion were reversed. In fact, if productivity were to be restored, only a portion of this cost might actually contribute new productivity to the economy each year. Rather, the vast majority of this cost represents an unsustainable over-exploitation o f natural resources and degradation of the environment. Itisuseful to expressthiscost as apercentageofGDP-inthis case, about 9.6 percent of Ghana's total GDP of US$7.62billion in2003 -inorder to provide a sense o f magnitude. The largest single sources of costs are timber depletion, amounting alone to 3.6 percent of GDP, followed by inadequate water supply and sanitation (nearly 2.4 percent of GDP) and damage to agricultural lands (1.8 percent of GDP). Projections of sectoral contributions to GDP in Ghana's policy documents assume that natural assets will continue to contribute significantly to economic growth. However, current national accounting systems neglect the negative economic effects o fnaturalresource degradation. Wealth accumulation i s consequently overestimated in the country: the Ghanaian Ministry of Finance currently uses gross savings as a standard indicator of wealth accumulation in order to monitor growth, which it measured to be 28 percent in2003. However, accounting methods that integrate natural resource depletion show that wealth accumulation i s in fact significantly lower than that calculated through traditional measures. As identified above, a problem with conventional measures o f GDP is that changes in such measures fail to distinguishbetween economic growth resulting from a true increase in income and economic growth resulting from a depreciation of natural assets. Depreciation o f the stock o f natural capital i s incorrectly counted as income. Development strategies that simply "cash in" the -202- endowment of natural resources are treated inthe same way as development strategies that do not depreciate their natural capital assets. To tackle this problem, a more adequatesustainability indicator i s the genuine savings rate, which corrects gross savings by subtracting the depreciation inproduced capital stocks and the depletion of natural assets, and adds investment inhuman capital. Negative genuine savings rates indicate that an economy i s not on a sustainable path, and so that future levels of economic welfare will decline. Ifthe rate i s positive, the economy i s on a sustainable growth path, even with exhaustible resources . More precisely, genuine savings i s calculated by adding expenditures on education (disregarding structures and e uipment already accounted for in GDP measures) to the conventional net national savings,Q6 and subtracting (i) the value of natural resource depletion o f oil, natural gas, and forests (namely, the total rents on resource extraction and harvest), (ii) the damages from carbon dioxide (calculated as the present value of marginal damages to crops, infrastructure, and human health over the time that carbon dioxide resides in the atmosphere), (iii) the value of health damages from particulate matter pollution, and (iv) the value of damages to produced assets from air pollution, beyond what i s counted as depreciation in standard measures of GDP. This estimate provides a better measure of net savings than gross national savings, making it a more precise predictor of future consumption levels. The World Bank's Little Green Data Book cites an adjusted net savings rate of 19.3 percent of GDP in 2003 - as opposed to the 20.9 percent of conventional net savings (that i s to say, only adjusting for capital depreciation) estimated by the Book and the 28 percent estimated by the Ghanaian Ministry of Finance. This figure o f 19.3 percent was reached after deducting natural resource depletion (from forests and minerals) and damage from COZ and particulate matter emissions, and adding educational expenditure (2.8 percent of GNI)."' Forest depletion only accounted for 2.5 percent, compared to the 3.5 percent calculated inthis appendix. Note that this i s not a complete measurement of genuine savings as defined above. In The Little Green Book's calculation of adjusted net savings, many types of natural capital were not included for practical reasons. In contrast, this appendix adds elements o f depletion and degradation to forests (beyond the 2.5 percent calculated by the Little Green Data Book) and agricultural soils, as well as new data on environmental health costs. With these resources accounted for, Ghana's performance on wealth accumulation and sustainability o f growth proves to be much less robust than previously thought: using the more comprehensive assessments o f costs, it has been determined that the genuine savings rate i s closer to 12.3 percent of GDP. This i s nearly 16 percentage points below what the Ministryof Finance uses as its standardo f wealth accumulation (28 percent). This discrepancy in estimated savings rate i s worrying, as the sustainability o f growth depends on wealth accumulation: high savings rates may in theory lead to increased wealth, which yield even higher savings rates, whereas low savings rates may lead to economic stagnation. Even more worrying i s that the genuine savings rate per capita i s negative after population growth i s taken into account. Ghana's key development strategies, including the Growth and Poverty Reduction Strategy (GPRS) 11,arebased on the assumption that natural assetswill continue to produceyields that are adequate to fuel economic growth in the country. Evidence presented inthis appendix, however, shows that these natural assets are declining inproductivity because o f overexploitation and poor lZ6Net national savings is simplythe difference between GDP and public andprivate consumption (adjusted for depreciation o f fixed capital) and net transfers. '*'World Bank, The Little Green Data Book 2005, page 95. The Little GreenBook infact calculates net savings as a percentage o f GNI; broadly speaking, these two figures are similar inmagnitude (2003 GNIo f US$7.5 billion vs. 2003 GDP o f US$7.6 billion according to UNSTAT) -203- management. Effective planningandpolicy formulation must incorporate sustainability of growth into measures of national accounting. Augmented measures o f savings and wealth are thus very important innational accounts ifsustainable growth i s to be achieved. -204- Appendix 2. Forestry and Wildlife Appendix 2. ForestryandWildlife Table A2-1: Century of State-led Forest Sector Reforms-Timeline Year Regime Policy / Theme Catalogue of Events / Outcomes 1830 Colonial Introduction o f cocoa into forest zone Administration of southern Ghana 1880s Colonial First colonial treatise on forestry'28 0 Responseto evidence during 1880s from Administration Ghana and other colonies o f degradation o fresource base Call for conservationandprotection o f forests 1890s Colonial Attempts to create Crown Lands for 0 Resistance from chiefs, and the Gold Coast Administration Forestry: Aborigines' Rights Protection Society 0 1894 Lands Bill Forced acquisition o f landby the state seen as 0 Governor Maxwell drafts a new untenable bill(1895) 0 Lands Billo f 1897 1900s 0 High forest zone seenas not sustainable Establishmento fthe Forestry Department (1909) 0 Timber trade regulated 0 Formalized native authority o f paramount chieftaincy and traditional council. 1910s- Forest Ordinance Law, 1927 (Cap. 0 Cap 157 enabled the constitutions and 1920s 157) [still inforce] (compulsory) constitution o f forest reserves 0 Vested incentral government the power to constitute and manage the reserves 1930s 1939 Concession Ordinance Law 0 Colonial foresters established, introduced a systemo f timber-harvesting rights andrevenues 0 Establishment o f an extensive system o f forest reserve covering almost 2lpercent o fthe country. 1940s Gold Coast Forest & Wild life Policy 0 Export markets for timber established 0 The conservation andmanagement o fpermanent forest estate 0 Liquidation o f offreserve forest 1950s Nkrumah -Protected Timber Lands Act 0 Postwarboom Local Government Ordinance 0 Election o f local council systemintroduced decline ininformal influence o f traditional authority 1960s K.A. Busiah Administration o f Lands Act, 0 Economic stagnation (Progress Concession Act, Forest Improvement Forest Improvement Fund(FIF) created Moloney (1887) Sketch o fthe Forestry o fWest Africa -205- 1966-69 Party) Afrifa Act Vestedincentral government, hadthe management of stool lands, collection o f revenues, and the right to grant timber concessions. 1970s Military Trees and Timber Decree, Forest Economic stagnation 1969-72 Regime - Protection Decree Prohibitiono f any activity inthe forest without 1972-79 K.A. Busiah the consent o f FD. Gen. Acheampong Gen.Akuffo J.J. Rawlings 1980s Control o f Bushfires Law, 1983 Drought and major bushfires throughout West 1980-81 Dr.Liman (PNDCL)-criminalizes negligent or Africa in 1983 destroy thousands o fhectares o f (Peoples reckless starting o f fires forest intransition zone; cocoa yields are halved. 1982- 91 NationalParty) Export RehabilitationProject (ERP) J. J. Rawlings DFID(0DA)-fundedForest Resource Soft loans givento industryto aid inrecovery. (PNDC) Management Project (FRMP) Huge investments inplants and machinery, but Minister majority older machinery (J.G.A. Renner- FDauthorized to manage off-reserve 82-86) forests, and collect revenues from the Attempts to control bushfiresfirst through resource(previously these were criminalizing offenders and more lately through collected by Lands Commission) the regulation and organization o f early burnsby district assemblies. 1985- 990 Minister Industryback on its feet (George Log exporters tripled Adamu - Discretionary allocation o f concessions on loose 86-87) terms 1991 Ministers Peak logging period, much o f it illegal -Peprah (91) -Danso (92) -Amankwa (93) 1992 1992 constitution sets out revenue Resultedinlack o f funds for forest rehabilitation sharing arrangements (Art.267); Timber industryno longer neededto negotiate parliamentary approval o fnatural with communities re: access to off-reserve forests. resource concessions (Art.268 ) T h i s lead to an acceleration inexploitation o f the and creation o fnatural resources forests. commissions (Art.269) Management o f off-reserve forests transferred to FD; replacing unclear arrangements between communities, OASL, FD 1993 MLFCTA - The FIA was no longer drafted Koft Smith Thus, FDcontinuedto rely solely on foreign aid appointed FC established (original) 1994 Forest & Wild Life Policy, which Introduction o f present policy on forest and Minister aimed to dismantle the old political wildlife - Kwabena economy and replace it with a new a Biannual renewal o fproperty marks Adjei legislative framework Deloitte report on institutional reform (to create a forest service agency for the FD) 8 Trees andTimber Amendment Act Illegal loggingwent into overdrive (493), introduces 6-monthly Starvationo fFD revenue issuance o fproperty marks and Timber trade regulatedthrough permits and levies on export o f logs levies -206- 1995 Johnney 0 InterimMeasures to Control Illegal 0 "Interimmeasures" introducedand widely seen Francois retires Timber Harvesting Outside Forest as a success as CCF Reserves 0 Suspension o f export o fround logs 0 Deloitte & Touche Report on 0 Massive reduction o f illegal logging (paramilitary creating a Forest Service able to task force o fFDandpolice) retain funds 0 More value-added processing o f logs Steep increase inrevenue 0 System o fregulating offreserve logging (including farmer right o fveto and compensation for crop damage 0 Proposed content for a new forest Act tabled 1996 Minister - 0 Forestry Development Master Planwas Kwabena Adjei established, outlines strategies, programs, and scheduling for implementation o f forest and wildlife policy. 0 Document on contents o fproposednew consolidated law prepared-based on discussions. Proposals for private participation inplantations flounder (CDC withdraws). 0 Forest Sector Development Project phase 1 (FSDP I) (created forest service). started 0 Development inforest conservation. 0 Annual Allowable Cut (AAC) set at. lmillion cubic meters 1997 Minster - Timber Resource ManagementAct Introduces Timber Utilization Rights / SRAs Cletus Avoka (TRMA) 1997, ACT 547 0 Govt. puts the "cream" into packages o fTUCs to be allocatedby auctions. Competitive "procedures" studythwarted by industrylobby 0 TRMA, together with, LI 1649, didaway with "interim procedures"-the expectationthat the procedures would be reflected inthe new law did not happen. 1998 Minster - Timber ResourcesManagement 0 Directors for new Forest Service recruited Christiana Regulations, 1998 L.I.1649 through open competitive recruitment Amoako 0 Forest Management Manuals developed for Nuamah Tucs. 0 Plans for forest services meet challenge vs. Kofi Smith constitutional role o f the Forestry Commission. leaves 0 "Reform overload" 1999 CCF FDKofi Natural Resource Management Plans for forest services meet challenge vs. Nksenkyre Program(NRMP) for sustainable constitutional role o f the Forestry Commission Appointed management o fresources 0 "Reform overload" HeadFC Established new integratedFC as a corporate The Forestry Commission Act, 1999 body. Act 571 0 S U N Systemaccounting introduced and embodiedinto FSD. 0 Banon chainsaw logging introduced. 0 2,000 people made redundant fromFC; retraining provided. -207- 2000 N D C N P - 0 FSDP I1starts Kwaku Afriyie 0 2001 wood export ban study commences; undertakes scenarios. Sam Appiah 0 FC structure review. appointedCE 0 Challenge to formation o f a unified FC by o f FC Wildlife Divisionand environmentalNGOs.Reform plans changed. 2001 Minister Wood industry study results and outline o f policy Kassim reforms-recommends "sofi landing scenario" Kassanga 0 Impositiono f export duty ontimber exports(Nationa1 ReconstructionExport Levy) FC CE Pursuit o f revenue objective by GoG removed from Policy and institutions reform debate set as office and agenda under NRMP acting Efforts to harmonize donor support to sector replacement increased when it i s discovered that 4 pilot Executive collaborative forestry programs (6 pilots each) are Director WLD being rundue to different donor requirements Nic Ankudey 2002 ASK - TRMA AmendmentAct 2002, ACT 0 Forest Policy Advisory Committee reviewed. Boachie 617 0 Enforcement o f Competitive Bidding Dapaah 0 FC publishes its service charter appointed FC 0 FC publishes first disbursementreport CE (SRA/ro yalties). 2003 Minister - Timber Resources Management Competitive Bidding System started (Pilot Dominic Fobih (Amendment) Regulations, 2003 L.I. PlantationAuction) -1721competitive for bidding o fTUC 0 1st competitive bidding for plantationtimber (21 March2003) Africa Forest Law & Governance 0 Forest forums piloted (AFLEG)Ministerial Declaration (13- 16Oct 2003) MLFdirectly managesHIPCplantations program (distortionary effect on FC managedprograms). 2004 Phase 1 Forest Fiscal Reform 0 MLFruncancellation ofNREL initiative 0 All export duties inthe timber industry - rationalizationo f forest tax system 0 1st competitive bidding for high forest (30 April 2004). 0 FC produces first set o f audited, consolidated accounts. Validation o f legal timber program(VLTP) starts -contract signed with SGS. -208- 2005 0 Cancellation o fNREL 0 All export duties inthe timber industry 0 FC Boardtermo f office ends (Sept 2005) but continues. Boachie- FSDP I1mainworks ends with extension of Daapahretires support for (a) Parliamentary subcommittee, (b) as CE o f FC. final work inMoFEP. Wildlife Division launches tender for forest sector JohnOtto0 0 appointed investmentinto Mole, Kakum (May 2005) Acting CE. 0 FC transfers responsibility for CFWR (the Sunyani Forest School) to KNUST 0 PFMproject established under DFIDfinancial aid to support roll-out o f a decentralized FMIS (Adum). 2006 Noble Biney 0 FC board continues inoffice (long delay in appointedas approving new board). Finance 0 FC Board challenges decisions o fMoFEP and Director by MLFMonamendment to export levy. Board 0 AG rules that Export Levyis legal. 2001 2002 2003 2004 Share of Share of Share of Share of total total total total TaX (in TUX (in TUX (in TUX (in Sector revenue percent) revenue percent) revenue percent) revenue percent) Finance 410.6 19.6 519.5 18.7 633.2 15.7 831.1 16.0 Agriculture 21.1 1.0 24.9 0.9 23.7 0.6 29.0 0.6 Timber 27.1 1.3 49.1 1.8 40.6 1.o 46.6 0.9 Mining 359.9 17.1 431.6 15.5 610.9 15.1 666.2 12.8 Manufacturing 219.5 10.5 349.6 12.6 410.9 10.2 557.7 10.7 Commerce 141.5 6.7 196.3 7.1 259.9 6.4 412.9 7.9 Other 919.0 43.8 1205.6 43.4 2061.8 51.0 2660.0 51.1 Total 2098.7 100.0 2776.6 100.0 4041.0 100.0 5203.4 100.0 -209- Public Financingofthe Forestry andWildlife sector 3.1.1 Table A2-5: AllocatedandReleasedDonorAssistance, 2002-2005 3.1.2 (reportedbythe MoFEPandMLFM) (inbillionsofcedis) Source 2002 2003 2004 2005 Budget Release Budget Release Budget Release Budget Release MoFEP 63.8 32.4 68.05 56.2 59 76.8 227.8 MLFM 39.9 12.7 46.2 41.8 253.5 100.2 250.2 Source: MOFEP, MLFM, Table A2-6:PlannedandActual SpendingofTotalCF andHIPCFund,2004 2004 Planned Actual Execution rate (inbillions ofcedis) (inbillions ofcedis) (in percent) CF 10513.1 10332.2 98.3 HIPC 1205.6 1629.1 135.1 Note: A comparison of total collected IGFsand spending could not be obtained. Source: MOFEP. MLFM. GOG IGF Donor Total (in (in (in (in percent) percent) percent) percent) Total I 80.2 100.0 106.6 100.0 227.8 100.0 414.6 100.0 Administration 14.1 17.6 0.0 0.0 166.3 73.0 180.4 43.5 Totalsubsectors 66.1 82.4 106.6 100 61.5 27.0 234.1 56.5 Land 32.2 40.I 14.8 13.9 0.0 0.0 47.0 11.3 Forestry 24.2 30.1 80.7 75.7 49.1 21.6 154.0 37.1 Mining 9.7 12.1 11.1 10.4 12.4 5.4 33.2 8.0 3.1.3 Table A2-8: Actual SpendingofFCby Sources ofFundingin2004 2004 inbillions Funding source o f cedis (inpercent) CF P.E. 20.8 87.7 Admin. 1.6 6.5 Service 0.7 2.8 Investment 0.7 2.9 Total 23.8 100.0 IGF P.E 26.4 22.9 Admin. 23.5 20.4 Service 44.7 38.8 Investment 20.5 17.8 Total 115.1 100 Source:FC data. -211- DonorAssistance Note: NSBCP=NorthernSavannaBiodiversity ConservationProject, HFBCP=HighForestBiodiversity ConservationProject, CFMP= CommunityForestryConservationProject, LAP=LandAdministrationProject, WFM= Wildfue ManagementProject, WDSP= Wildlife DivisionSupportProjects Source: MLFM. -212- Appendix 3. Mining TableA3-1: Key Mining Legislation Additional Profits Tax Law 1985 (PNDCL 122) Concessions Ordinance 1939, (c.136 Laws of G.C. 1951Revisions), s.38 andFormSchedule Diamond Mining Industry ProtectionRegulations, 1927 (No.9/1927) Environmental ProtectionAgency Act, 19994 (Act 490) ExplosivesRegulation, 1970 (L.I.666) GoldMining ProductsProtectionOrdinance(c. 149 9, Laws ofthe Gold Coast, 1951Revision) Mercury Law, 1989 (PNDCL 217) Minerals andMiningAct,2006 (Act 703) Minerals CommissionAct, 1993 (Act 450 formerly PNDCL 153) Minerals (Offshore) Regulations 1963 (L.I.257) Minerals Regulations, 1937 -Minerals Regulations, 1962 (L.I.23 1)especiallyregulation 1and Form5 ofthe first schedule Minerals Regulations, 1963 (L.I.253) Mining Regulations, 1970 (L.I.665), especiallyregulations4, 6, 10 and 194-205 Mines (Royalties) Regulations, 1987 (L.I.1349) PreciousMinerals Marketing Corporation Law, 1989 (PNDCL 219) Prospectingand DiggingLicense Regulations, 1950(Vol. VIII, 1954c Laws ofthe Gold Coast, p. 1032) Rivers Ordinance 1903 (Cap 226) State GoldMining Corporation [Acquisition of Assets Amendment] Decree 1968 (NLCD 218). Subsidiary TransactionsinGold Regulations 1947 Water Resources CommissionAct, 1996 (Act 552) TableA3-2: Collectionof Revenues and Employment 2003 Collectedrevenuesinthe mining sector (inUS$) 45,486,000 Totalrevenues(inUS$) 426,000,000 Number ofpersons employedinthe mining and quarrying sector 61,917 Total number ofpersons employed 6,441,121 Mining revenueslnumberofpersons employedinthe mining and quarrying sector 734 Totalrevenues /total numberofpersons employed 66 Source: WorldBank data. TableA3-3: Contributionof Mining Sector to total Collectionof IRS (Royalties, PAYE, Corporate/Income) (in percent) Year Royalties PAYE Corporate/Income 1999 97.4 9.4 5.8 2000 98.6 12.3 2.0 2001 99.0 11.6 2.2 2002 99.5 11.0 1.6 2003 99.3 NIA N/A 2004 98.2 7.4 3.6 Source: Minerals Commission. -213- TableA3-4: Mining Sector-Central GovernmentAllocationand Expenditures, 2002-2004 2002 2003 2004 Allocation Total budget allocation (inbillions o f cedis) 11.9 19.7 28.8 Total budget allocation (as a percent oftotal budget) 0.2 0.2 0.2 Total budgetallocation (as a percent of GDP) 0.0 0.0 0.0 Real allocation (2000 prices) 7.2 9.3 11.9 Real growth 0.0 28.7 28.1 Actual expenditures Total expenditures (inbillions of cedis) 22.3 16.4 20.3 Total spending (as a percent oftotal budget execution) 0.3 0.2 0.1 Total spending (as a percent of GDP) 0.0 0.0 0.0 Total real spending (2000 prices) 13.5 7.7 8.4 Real growth 0.0 -42.8 8.5 Budgetexecutionrates Total budgetexecution (percentage) 187.4 83.2 70.5 Budget execution of investment expenditures (percentage) 1566.7 140.8 55.0 Source: MOEFP. TableA3-5: Financingof the Mining Sector by Recurrentand InvestmentExpenditures, 2002-2004 (percentage) 2002 2003 2004 RealGrowth 2002/03 2003/04 Total 100.0 100.0 100.0 -42.8 8.5 CurrentExpenditure 36.8 57.9 54.2 -9.9 1.5 Wages and salary 6.7 34.1 26.6 190.3 -15.5 Goods & services 6.3 11.0 9.9 0.0 -2.6 Services 23.8 12.8 17.7 -69.2 50.2 CapitalExpenditure 63.2 42.1 45.8 -61.9 18.1 Source: MoFEP. -214- FigureA3-1: Comparisonof theAllocationandExecutionof the InvestmentBudget (in billionsof cedis) I I - Allocated Released Allocated Released 2002 2003 ~ ~ m External resources Domestic resources Source: MOFEP. 4.1.1. FigureA3-2: Financingof the InvestmentBudget, 2002-2004 (as a share of total Ministry of Mines investment expenditures) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2002 2003 2004 Fiscal relenues Borrowing o Grants Source: MOFEP -215- Table A3-6: Distributionof PublicResourceswithinthe MoLFMin 2005 GOG IGF Donor Total inmillions in inmillions in inmillions in in in of US$ percent ofUS$ percent of US$ percent millions percent of US$ Total MLFMbudget 8.9 100.0 11.8 100.0 25.3 100.0 46 100.0 MLFM 1.6 17.6 0.0 18.4 73.0 20.0 43.5 Administration MLFMsubsectors 7.3 82.4 11.8 100 6.8 27.0 26.0 56.5 Land 3.6 40.1 1.6 13.9 0 0.0 5.2 11.3 Forestry 2.7 30.1 9.1 75.7 5.4 21.6 17.1 37.1 Mining 1.1 12.1 1.2 10.4 1.4 5.4 3.7 8.0 Miningadministration 0.2 2.3 0.2 0.4 Minerals 0.0 10.4 1.2 2.7 Commission 1.2 Mines Department 0.2 2.7 0.2 0.5 GeologicalSurvey 0.6 7.1 1.4 5.4 2.0 4.4 Department Source: GoG (Appropriation Act 2005). Table A3-7: Compositionof BudgetaryAllocationsby Sources of Funding,2005 (in millionsof US$ and as a share of total MoLFMbudget) GOG IGF Donor Total in in in in in In in in millions percent millions percent millions percent millions percent of US$ ofUS$ of US$ of US$ Mining 1.08 12.1 1.23 10.4 1.38 5.4 33.2 8.0 Administration 0.20 2.3 1.8 0.4 Minerals Commission 0.0 1.23 10.4 11.1 2.7 Mines Department 0.24 2.7 2.2 0.5 GeologicalSurvey Department 0.63 7.1 1.38 5.4 18.1 4.4 Source: GoG (Appropriation Act 2005). -216- Table A3-8: Incomeofthe MineralsCommission,2002-2005 (in billionsof cedis) 2002 2003 2004 2005 Total 5.0 6.5 10.0 10.7 Considerationfees 4.1 5.1 6.5 7.7 Exemptionfees 0.3 0.3 1.8 1.3 Sale ofpublications 0.0 0.1 0.4 0.4 Other receipts 0.0 0.0 0.0 0.0 Search& information 0.1 0.2 0.7 0.2 Processingfees 0.1 0.4 0.1 0.3 Servicefees 0.4 0.3 0.6 0.7 Nominal growth rate 30.8 54.7 6.6 Source: MC data. Table A3-9: Comparison of MC IncomeandExpenditure,2004 and2005 (in billions of cedis) 2004 2005 Revenues 10.0 10.7 Expenditures 15.0 23.3 Deficit 5 12.6 Memo Ratio Revenue/expenditure 66.6 45.9 (percentage) Source: MC data. Table A3-10: Compositionofthe MESBudgetin2005 (percentage) CF IGF Donor Total CF IGF Donor Total Total 100 100 100 100 81.0 7.1 12.0 100.0 Headquarters 18.3 63.8 19.3 76.6 23.4 0.0 100.0 of whichEPA 5.4 63.8 8.9 49.3 50.7 0.0 100.0 CSIR 69.3 34.0 58.6 95.9 4.1 0.0 100.0 GhanaAtomic 12.4 2.2 100.0 22.2 45.4 0.7 53.9 100.0 Energy Commission Source: GoG (Appropriation Act 2005). -217- Appendix 4-1: The Agricultural Sector The agricultural sector i s the maineconomic sector inGhana, as it contributes to 38 percent of the GDP, employs 45 percent o f the active population (National Development Planning Commission 2005) (about 60percent of the rural labor force), accounts for about 75 percent o f the foreign exchange earnings (IFAD2006), andcontributes to meetmorethan 90percent ofthe foodneeds ofthe country (EPA 2002). The agricultural sector has led the economic growth of Ghana with an average growth rate of almost 6 percent inthe period 2002-2004. As shown inTable A4-1-1 below, it i s also the sector that will continue to pulleconomic growth inthe near future. TableA4-1-1: GDPvs. SectoralGrowthRates2001-2009 2001 2002 2003 2004 2005" 2006* 2007* 2008" 2009* 2001-09 Real GDP 4.20 4.50 5.20 5.80 5.80 6.11 5.83 6.06 5.72 547 Agriculture 4.02 4.36 6.06 7.49 6.50 5.24 6.71 5.18 6.60 5.8 Industry 2.93 4.73 5.06 5.13 5.80 6.11 5.83 6.06 5.72 5.26 Services 5.07 4.70 4.68 4.73 5.40 5.75 5.90 5.99 5.72 5.33 * Projected. Source: Adaptedfiom National Development Planning Commission 2005. The agricultural sector is predominately small-holder (small-scale farmers account for about 80 percent of the total agriculture production (National Development Planning Commission 2003]), traditional (the bush-fallow system is the predominant farming system in Ghana), and ruinfed (only OSpercent of the agricultural land or 0.04percent of the total land i s irrigated). Inaddition, the agricultural sector, particularly in the desertification-prone areas of the country, i s characterized by low input technologies (Le,, fertilizers, improved seeds, mechanization, etc.). Because of the highcost of fertilizers resulting from the removal o f subsidies, fertilizer consumption, for instance, amounts to about 6 kgha (World Bank I2005); this represents almost half o f the quantity o f fertilizer per hectare of arable land in Sub-Saharan Africa (FA0 2005) and almost one-tenth o f the quantity of fertilizer per hectare for developing countries (National DevelopmentPlanning Commission 2003). Agriculture productionmainly depends on soil productivity (EPA 2002). About 63 percent of the land area in Ghana i s agricultural land (World Bank 2005). However, only 18 percent i s currently under cultivation (WDI 2005). Only 0.5 percent of the agricultural land (IFAD (2006), or 0.04 percent o f the total land (National Development Planning Commission 2003), i s underirrigation. The agricultural sector is made of five subsectors: (a) crops other than cocoa (e.g., cereals, industrial crops and horticulture), (b) cocoa, (c) forestry, (d) livestock and poultry, and (e) fisheries. Contribution of the different subsectors to the Agricultural GDP (AGDP) inthe recent past i s reported in Table A4-1-2 below. (Please, note that contribution of crops and livestock i s jointly calculated. The livestock subsector contribution to the AGDP averagedbetween 7 and 9 percent). -218- Table A4-1-2: AgriculturalSector: Percentage of Subsector Contributionto AgriculturalGDP, 2000-2004 Subsector 2000 2001 2002 2003 2004 Crops andlivestock 62% 63% 64% 61% 58% Cocoa 14% 13% 12% 16% 20% Forestry 11% 11% 11% 11% 10% Fishing 13% 13% 13% 12% 11% Source: Adaptedfrom National Development Planning Commission 2005. The production of crops is divided into roots and tubers (such as cassava, yam, cocoyam, and plantain) and cereals (such as maize, sorghum, millet, and rice). Crop production in recent years i s reportedinTable A4-1-3 below: Table A4-1-3: Roots/Tubersand CereaYCropsProductionper Year Year Root andtubers (in thousands of Cereal and crops(in thousands tons) of tons) 1995-99* 13.151 1.753 2000 15;027 1;711 2001 16,275 1,648 2002 17,770 2,155 2003 18.186 2.042 *Average. Source:Adaptedfrorn ISSER 2004, in World Bank et al.(2005. -219- Appendix 4-2: Erosion Hazards by Region Table A4-2-1: ErosionHazards by Region Region Slight to moderate Severe Very severe Km2 Y O Km2 YO Km2 Y O Northern 23,3 10 10% 19,062 8% 23,330 10% Upper East 4,574 2% 3,774 2% 964 0% Upper West 7,288 3% 4,470 2% 7,148 3% Brong Ahafo 10,697 5% 20,932 9% 5,219 2% Volta 6,615 3% 7,376 3% 2,901 1% Ashanti 7,115 3% 11,826 5% 6,017 3% Greater Accra 3,005 1% 101 0% 85 0% Eastern 3,090 1% 11,015 5% 2,852 1% Central 2,002 1% 7,780 3% 521 0% Western 2,745 1Yo 16,913 7% 3,675 2% Total 70,441 31Yo 103,249 45% 52,712 24% Source: Adaptedfiom Asiamah 1987,in EPA 2005. -220- Appendix 4-3: Immediate Causes of Land Degradation: Biophysical and Anthropogenic Factors The symptomatic factors that led to land degradation inGhana may be dividedintwo categories: biophysicalor natural, and human-inducedor anthropogenic. 1. Biophysicalfactors (A) Physical characteristics of the soil Physicalcharacteristicsof the soil reducethe capacity of the soil to retain or drain water, limit its capacity to absorb nutrients, and obstruct root growth. Most of the soils in Ghana are in fact characterized by extremes o f textures (e.g., sand textures, graveliness, stoniness, etc.), particularly in the Sudan and Guinea Savannas and Transitional zone. In addition, extensive areas in the country have shallow concretionary, rocky, and clayey soils. These characteristics reduce the soil's capacity to properly retain or drain water, limit its capacity to absorb nutrients, and obstruct root growth. As a result, the productive capacity o f these soils i s undermined. (B) ToPograPhY The topography of the country, characterized-as mentioned above-by gentle and stable slopes, does not representper se a major factor of degradation. However, practices that remove or degrade the vegetation (see below) create large areas o f bare land that may become highly susceptible to erosion. (C) Climate conditions Climate events, such as rainfalls and droughts, may contribute to land degradation. The prolonged periods o f highly erosive rainfalls separated by prolonged dry periods, particularly in the Guinea and Sudan Savanna zones, may contribute in fact to reduction o f vegetative cover, thus predisposing those areas to a highrisk o f erosion, Inaddition to the seasonal variability inrainfalls, wide fluctuations in distribution, amount o f rainfall, and number o f rainy days that occur over years and decades frequently lead to droughts. The major droughts of 1968-73, 1982-85, and 1990-92 caused serious hydrological imbalances that negatively affected land resources, particularly soil quality and fresh water supplies (EPA 2002). Each drought cycle exacerbates the vulnerability o f the affected area to desertification. Although droughts are climatic events, human-made activities (e.g., removal o f vegetation cover, overgrazing, etc.) can also reduce the resilience of the area to droughts. Moreover, it is likely that climate change will adverselyaffect land resources in Ghana. Impacts of the climate change on land degradation in Ghana have not yet been studied in depth or quantified. However, it seems likely that climate change, in the absence of an adaptation strategy, will exacerbate land degradation in Ghana. Climate change will in fact probably result in, among other things: (1) increased rainfall variability and probably an overall drop inrainfall (10 percent lower rainfall by 2050 i s expected, IPCC 1997), thus increasing the chances o f drought periods; (2) rise in temperatures (a 1.4-1.6 degree higher temperature by 2050 i s expected, IPCC 1997), likely resultinginincreased forest and bush fires; and (3) increased evaporation, resulting inreduced soil quality. Climate change may also contribute to acceleratedcoastal erosion, to which Ghana i s particularly vulnerable (World Bank et al. 2005). -221- 2. Anthropogenicfactors Human-induced or anthropogenic factors represent the main cause of land degradation in Ghana. These factors consist of unsustainable land use and land management practices. Four types of human-induced activities are considered relevant in the context o f Ghana: unsustainable farming practices, removal of vegetation cover (which includes deforestation and overgrazing by livestock), miningactivities, andurbanizationandindustrial activities. (A) Unsustainablefarming practices Some widely adopted traditional farming practices are not sustainableanymore. The traditional farming system (bush-fallow system), which involves slashing and burningof forests and grassland, and the rotation of cultivated fields (rather than crops) over years, and which is the predominant farming system in the desertification-prone areas, i s only sustainable under the conditions of low population density and abundant land. Ina context of rapidly increasing human and animal population (see Box 5-1 on the linkages between land degradation and population growth, and Box 5-2 on livestock increase), the traditional system no longer becomes sustainable. The 8-15 years natural fallow period normally required to regenerate soil fertility after 1-3 years of cropping has been reduced to 2-3 years in Ghana (FAO). In the absence of soil and water conservation measures and external nutrient replacement practices, unsustainable intensification leads to a progressive reduction of soil nutrients, organic matter, and other chemical processes, and to a consequent decline in productivity and crop yields. To overcome the problem of reduced soil fertility/productivity, and-at the same time-support the increasing food requirements, traditional farmers have expanded their cultivated land by either clearing new land (including forests) for agriculture purposes, thus reducing the country's vegetation cover and favoring further soil erosion, or moving toward new, marginal, and more fragile areas, such as riverbanks or hillsides, thus contributing to accelerated erosion. Although agricultural land area i s considerably in excess of the area under cultivation (see paragraph. 15, chapter 5), cultivation i s already taking place in marginal lands in some regions, particularly the Upper East (EPA 2002). The pervasive use o f fires to clear land, besides contributing to the loss of vegetation cover over extensive areas of the country, eliminates crop residues, which would contribute to generate organic matter inthe soil. (B) Removal of vegetation cover: deforestation and overgrazing Removal of vegetation cover creates conditions that favor physical deterioration of the land (water and soil erosion, soil compaction, crusting, etc). Two major activities in Ghana contribute to the removal of vegetation cover: deforestation and overgrazing. Deforestation (see Chapter 3 on Forestry for more details) represents probably the most serious form of natural resource degradation in Ghana, and it i s one of the main direct causes o f land degradation in the country. In the presence o f a rapid population growth, the demand for more land for agriculture, and for fuelwood and other wood products (e.g., charcoal), which the majority o f ruralpeople rely on for their livelihoods, has increased. The reduction of soil fertility and productivity has forced farmers to expand their cultivated lands and clear forest areas. The poor enforcement o f regulations controlling access to and use of forestry products has favored unsustainable logging practices and indiscriminate fuelwood extraction. A market price that i s lower than the real value of wood has contributed to overexploitation of forestry resources in the country. Forest resourceshave beendepleted at arate of 1.7 percent per annum inthe period 1990-2000 (WDI2005), but, according to the NationalAction Program to combat Drought and Desertification, at a rate of 3 percent in the most desert-prone areas. Overgrazing is causedby the combination of rapid increase inthe livestock population, sedentarization of pastoral populations, and the reliance o f the livestock sector on extensive grazing on natural pastures and poor development of pasturelands. Goat, sheep, and cattle populations have increased by 32 percent, 20 percent, and 6 percent, respectively, in the period 1997-2003 (ISSER 2004, in World Bank et al. 2005), increasing the pressure on land resources. The majority o f livestock herds are concentrated in the Guinea and Sudan Savannas; the Upper West, Upper East, and Northern Regions-the most vulnerable areas to land degradation in the country-host 74.4 percent, 36.5 percent, -222- 43.4 percent o f the national livestock, respectively (EPA 2002). In 1996 the density of livestock in the Upper East Region was 130 unitskm' (EPA 2002). Moreover, the increase of livestock population is an important factor inphysicalcompaction of the soil. (C) Mining activities Mining, particularly illegal mining activities, is one of direct causes of land degradation most specific to the Ghanaian context (see Chapter 4 on Mining for more details). These activities are accompanied by deforestation and removal of the fertile topsoil o f adjacent agricultural lands. According to the National Action Program to Combat Drought and Desertification, illegal surface mining i s taking place inDakrupe and near Laribanga inthe Bole and West Gonja Districts in the Guinea Savanna zone, and inNagondi inthe Upper East Region. (0)Urbanizationand industrialactivities Rapid urbanization and increased population have increased the pressure on land, not only regarding farming to meet increased food requirements, but also for other competing uses, such as housing and infrastructure development. At the moment, industrial activities leading to land degradation (e.g., chemical pollution o f the soil from municipal wastes, excessive use of fertilizers, herbicides, and insecticides) do not represent a major problem in Ghana. However, they may become a factor of increasing importance in the future in presence o f rapid urbanization, a shift to agro-industry, and progressive industrialization, and inthe absence of effective regulation that controls the disposal and use of toxic substances. -223- Appendix 4-4: Main processes of Land Degradation in Ghana The major processes of land degradation in Ghana are physical (in the form o f soil erosion, compaction, crusting and iron-pan formation), chemical (depletion ofnutrients,salinity and acidification), and biological (loss of organic matter). Physical degradation Soil erosion i s the main form of land degradation in Ghana. The main causative - agents of erosion are water and wind. Despite Ghana's topography does not present steep slopes129,the intensityo frainfalls inall ecological zones130is generally high.Rains tend to be therefore highly erosive. Runoffplot studies on bare plots invarious ecological zones o f Ghana show soil losses ranging from 187 t/ha a-1 to 0,6 t/ha a-I, with corresponding values of runoff as a percentage o f rainfallranging from 47 to 18 percent (Bonsu 1979, inEP-42002) (see Table A5-4-1). Wind erosion i s presentlynot a major form of soil erosion inGhana, but it can become more serious as the area of bare land increases due to vegetation removal (EPA 2002). Chemical degradation Chemical degradation of the soil i s considered the secondmost severeprocess of - land degradation inGhana (Sherr 1999, inEPA 2002). Projected figures from 1984 data estimated that the A5-4-1). Salinity - salt intrusioninthe soil annual depletion of soil nutrients in 2000 was 35 Kg N, 5 K g P and 20 Kg Wha (EPA 2002) (see Table - occurs mostly within the Costal Savannah. Biological degradation - Organic matter content in soils in generally low (less than 2percent in the topsoil) (MoFA 1998, in Oppong-Anane) as most o f the soils are old and have been leached over a long period of time. The levels of organic carbon, nitrogen and available phosphorus are also generally low (FA0 2005). The annual burning, removal and grazing o f crop residues prevent the build-up o f new organic matter. Table A4-4-1 Erosionon bare plotswithin different ecologicalzones in Ghana - Ecological zone Slope ("3) Soil loss (t/ha a-1) Runoff% ofrainfall Semi-deciduous forest 7.5% 186.9 47% Forest-Savannah 3% 12.8 38% transition Guinea Savannah 2% 0.9 11.5% Costal Savannah 2.5% 0.6 18% Source:Adaptedfrom Bonsu (1979) in EPA (2002) Table A4-4-2 Nutrient depletion rates inGhana and Sub-SaharanAfrica - Nutrient Ghana 1982-84 Ghana 2000* SSA 1983-2000 Nitrogen(N) 30 Kgha 35 K g h a 22-26 Kgiha Phosphorus (P) 3 Kgiha 4 Kgiha 5.73-6.87 K g h a Potassium (K) 17 K g h a 20 Kg/ha 18-23 Kg/ha Source: EPA (2002) * Projected lZ9Most slopes are less than Spercent steep, and most do not exceed lpercent [Oppong-Anane]. 130Ghana is divided in six agro-ecological zones, defined on the basis o f climate and refleted by the natural vegetation, namely Sudan, Guinea and Costal Savannah zones, the Forest-Savannah Transitional zone, the Semi- deciduous Forest, and the HighRainforest zones. -224- Appendix 4-5: Technical Options, Characteristics, Risks, and Long-term Effects of Soil Conservation in Different Agro-ecological Zones in Ghana TableA4-5-1: TechnologicalOptionfor Soil Conservationand Agro-ecologicalzones Technological option Agro-ecological zone Mineral fertilizers Allzones Compost Allzones Minimumtillage All zones Mulching All zones Vegetative barriers All zones Poultry manure Semi-deciduous forest zone (Ashanti Region) No-till Forest and transition zones Improvedfallow (Mucuna) Forest and transition zones and Guinea Savanna Tied-ridge Sudan and Guinea Savanna Farmyard manure/ Animal dung Sudan, Guinea and Coastal Savanna Ridge furrow system Sudan, Guinea, Coastal Savanna, and Transition zones Broadbed and furrow system Costal Savanna, heavy clays Shallot farming Costal Savanna (salt-affected soils o fKeto) Cowdung SavannaRegion Compound farming SavannaRegion(around houses) Stone bunding SavannaRegion(on sloping land) Stone-lines Sudan Savannaand wherever available Source: Adaptedfiom Quansah 2001, and FAO. -225- Table A4-5-2: Indigenous Soil andWater Conservation SysteminNorthern Ghana SWC system Characteristics Broad beds These beds, normally planted with groundnuts, millet, and sorghum, reduce the effect o fwater erosion. Stone bunds/Terracesystem Stone bunds have beenerected to trap water for crops inthe rainy season. These bunds have beendeveloped into a terrace system on the slopes. Mounds Tillage method for cropping. The purpose is to improve the exploitable volume o f soils for the crops. Ridging Method for controlling soil erosion. In the uplands o f the Savannaregions, soil is raised inthe form o f a line perpendicular to the slope o f the terrain. In the Northern Region, ridging is done parallel to the contour to enhance runoff during the rainy seasonandprevent drainage problems. Pit system Stones are removedto create a pit for collection o fwater. This system can retain water for some time because o f the high clay content o f the subsoil. Stone lines Continuous lines o f stones ina field. Stone lines slow down the flow o f rainwater, thus enhancing infiltration, and facilitating to a certain extent the depositiono fvegetable debris and fine soilparticles which increase soil fertility Basins Pieces o fland surrounded by irregularly shapedridges. They retainrunoff occurring during the rainstorm inorder to offset water deficit during dry spell. Stone terracing Used inplaces with slopes around 10percent. Mixed cropping This practice involves plantingcrops ofdifferent rootingdepths onthe same piece o f landto reduce competition for nutrientsand water. Cow dung around compound Itensuresgoodvegetative growtharoundthe houses. houses Plantinggroundnuts Onflat areas it checks soil erosionbyproviding surface cover. Source: Adaptedfrom ODI 1999, -226- Table A4-5-3a: Risks Associatedwith Various SLMPractices Method Long-term effects Soil and water conservation Failure from inappropriate designresulting inincreased damage down the structures slope. Fireandbrowsingdamageto biologicalsoil conservation measures. Trampling by cattle. Minimumtillage Increasedweed infestation. Loss o frequired mulchto livestock Mineral fertilizer Loss o f capital investment indrought years. Farmyard manure Increased weed infestation. Rotation and intercropping Uncertain markets for some leguminous crops inrotation(e.g., soybean). Intercropsmay offer alternative hosts for pests and diseases. Improvedfallows Longer dry spells after transplanting. Livestock damages unprotectedimproved fallows, especially inthe first dry season. Late dry seasonfires. ~~~ Source: Quansah 2001. Table A4-5-3b: Long-term EffectsAssociated with Various SLM Practices Method Long-term effects Soil and water conservation Ifwellmaintained, the effects willimprove withtime structures Conservationtillage Gradual build-upo f soil fertility leads to gradual increases inyields. Inorganic fertilizer Main effects inthe first season. Some residual effects inthe second season. Inappropriate fertilizer use over year may lead to nutrient imbalances. Farmyard manure/ poultry Main effects inthe f r s t season. manure Some residual effects inthe second season. Repeated use improves soil structure and other characteristics. Poor quality manure likely to result inincreased weed infestation. Improved legume pastures Productivity after the pasture is increased for more than one season. Rotation and intercropping Immediate effects for one seasononly. Long-term improvement o f soil structure. Greenmanuring Immediate effects for one seasononly. Long-term improvement o f soil structure attained with regular use. Improvedfallows Direct effects for 2-3 seasons. Source: Quansah 2001. -227- TableA4-5-3c: Assessment of Various Methodsfor Soil Fertility Management Criteria .... Technologies .... Natural Mechanical Manure Rotation Inorganic Green Improved fallow e5 soil use fertilizers .... manure fallow years conservation Land requirements 0. 0 0 0 0.. 0.. Labor input 0 0. No extra 0 0. 0.. Capitalinput 0 0 0. 0 0 0 (Transport) Draught power 0 Helpful 0.. Helpful 0 0. 0 needs Periodforegone <5 years 0 0 0 0 1season 2-3 seasons Associatedrisks Landtenure Breakage Weeds Lowvalue Capital loss Pests Pests, for some livestock, fire .... .... .... crops Production 0 0.. 0. 0. 0. 0. 0.0 increase Skills required 0 0 0.. 0.. .... (Depending on crops) Lastingeffects 00 Increasing 1-3 Continuous 1-2 seasons 1season 2-3 seasons Short-term 0 0-0. 0.. 0. 0. 0 benefits (pasture) (fodder. food) By-products Pasture Water retention 0 Diversified 0 Fodder (food, Firewood output fiber) Side-effects Weeds -5 Needfor Weeds -> Improved Nutrient Weed Weed labor maintenance labor food security imbalances suppression suppression ->less labor ->less labor ~~ - 0.00 =very high 0.0 =high 00=medium 0 =low 0 =none Source:Adaptedfiom Raussen 1997,in Quansah2001. -228- Appendix 4-6: Policy Framework-Key Environmental Policies, Strategies, and Action Plans The Ghana EnvironmentalPolicpThe Ghana Environmental Policy (1991) aims at improving the living conditions and the quality of life of present and future Ghanaian generations. It seeks to ensure reconciliation between economic development and natural resource conservation, by promoting sound management o f naturalresources. Key issues inthe policy include land, forestry, and water management. Specifically, the policy seeks to (1) maintain ecosystems and ecological processes essential for the functioning o f the biosphere; (2) adequately protect humans, plants, and animals, and their biological communities and habitats against harmful impacts and destructive practice, and preserve biological diversity; (3) reduce and, as far as possible, eliminate pollution and nuisances; and (4) integrate environmentalconsiderations in sectoral, structural, and socioeconomic planning at the national, regional, district, and grassroots levels. Among the various principles underlying the policy are (1) the use of the most cost-effective means to achieve environmental objectives, (2) the use of incentives in addition to regulatory measures, (3) the delegation of decision making to the most appropriate level o f government, and (4) public participation inenvironmental decision making. The Ghana Environmental Policy provides the broadframework for the implementationof the National Environmental Action Plan. The National Environmental Action Plan-The National Environmental Action Plan (NEAP) (199l)-based on an extensive review of the key sectorshsues underpinning the country's economy and environmental sustainability (land management, forestry, wildlife, water management, marine and costal ecosystems, mining,manufactory industries, hazardous chemicals and human sett1ementsFprovides the basic policy framework for overall environmental and land management. At the core of the implementation strategy there are enhancedmanagement practices. The Forest and Wildlve Policy-The Forest and Wildlife Policy (1994) seeks to promote the conservation and sustainable use of the nation's forest and wildlife resources. The policy endeavors to bring the forest and wildlife sectors together for purposes o f conservation through sustainable use. Its guiding principles include (1) the right of people to access natural resources for maintaining a basic standard of living, (2) the concomitant responsibility to ensure sustainable use o f such resources, and (3) the wise use of these resources in view of their contribution to the country's economy. The Forest Development Master Plan (2001-20 lo), which implements the Forest and Wildlife Policy, promotes sustainable forest and savanna woodland management, propagation o f forest-based products, and conservation o fprotectedareas. The Soil Fertility Management Plan-The Soil Fertility Management Plan (1998) encourages the sustainable use o f lands, by, for instance, promoting crop rotations, agroforestry and soil and moisture conservation practices. TheAcceleratedAgricultural Growth andDevelopmentStrategy-The Accelerated Agricultural Growth and Development Strategy (AAGDS) o f 1996 represents the agricultural strategy to improve human welfare and reduce poverty inthe country. Its mainpurpose i s to facilitate agricultural growth to 6 percent of the GDP in order to enable the economic growth that will contribute to making Ghana a middle-income country. Programmed for implementation over a 1O-year period (2001-20lo), the AAGSD seeks to stimulate agricultural production by (1) improving access to markets, (2) increasing access to technology for sustainable natural resource management, (3) facilitating access to agricultural finance services, (4) improving the quality of rural infrastructures, and (5) enhancing human and institutional capacity. The National Wildflre Policy-The National Wildfire Policy seeks to promote the effective management o f wildfires to guaranteethe sustainable management o fnaturalresources and the restoration o f environmental quality. More specifically, it seeks to (1) ensure the prevention and control o f wildfires, (2) introduce alternative resource management systems that will minimize the incidence and effects o f -229- wildfires, (3) institute incentives and reward systems in wildfire management, and (4) promote user- focused research on wildfire management. The Water PoZicp-The Water Policy aims to ensure effective development and management o f the country's water resources. Based on the principle o f Integrated Water Resource Management (IWRM), it will inparticularencourage the sustainable exploitation, utilization, andmanagement o fwater resources to ensure full socioeconomic benefits to present and future generations, while maintaining biodiversity and the quality o f the environment. Among other measures, it will ensure the availability o f water in sufficient quantity and quality for different purposes, including agricultural use to sustain food production and security. Finally, it will promote the development and use o f appropriate technologies for sustainable water resources use. -230- Appendix 4-7: The National Land Policy The Land Policy o f Ghana (1999, revised in 2002) aims at promoting "the judicious use of the nation's land and all its natural resources by all sections of the Ghanaian society in support of various socio-economic activities undertakenin accordancewith sustainable resource management principles and inmaintainingviable ecosystems." The guidingprinciples upon which thepolicy isbasedinclude, among others: ....Land as a common national or communal property resource held intrust for the people and used inthe long-terminterest ofthepeople ofGhana; Optimumusage of land, includinghuman settlements, industry, commerce, agriculture, forestry, mining,protection ofwater bodies andthe environment; Equitable and reasonable access to land, within the context o fnational landuseplanning; Security of tenure. Keypolicy provisions include, among others: (a) Facilitating equitable access to land: (i) each individual can have access to land in any part of Ghana (unless the area has been declared a protected area), (ii) planning schemes for all land users to facilitate dispositions of land for development should be prepared, (iii) prices for private land transactions will be determined by the market, and (iv) prompt, fair, and adequate compensation shouldbepaid for land acquired through compulsory government acquisition.; (b) Guaranteeingsecurity of tenure andprotection of land rights: (i) traditional sources of land all tenure, as well as those derived from common law, are recognized legitimate, (ii) land-related decision making should take into consideration the conservation of the land and of its natural resources, and (iii) land titling as best and sufficient evidence o f title to land; (c) Ensuring sustainable land use: (i) the use o f land in Ghana will be determined through national land use planning; (ii)all lands declared foresthature reserves, national parks, and wildlife sanctuaries are "fully protected," (iii) use involving mechanized agriculture, cattle ranching, land the dairy farming and manufacturing industry, and mining and other extractive industries must conform to environmental conservation principles, environmental laws, and-when required-to the Environmental Impact Assessment, and (iv) land development planning for the purposes of human settlement, industry, and large-scale intensive agriculture must make adequate provisions for, among others, land and other environmental conservation requirements; (d) Enhancing land capability and land conservation: (i) supply of land will be sustainedby all the appropriate methods, including soil conservation, improving soil productivity, control of desertification, rehabilitation of degraded land areas, and land reclamation, (ii) no land with a primary forest cover must be cleared for the purpose of establishing a tree crop plantation or mining activity, (iii)encouragement and other forms of incentives will be provided for the adoptionof land use methods or practices that sustain land capability or conserve land. -231- Appendix 4-8: The National Action Program to Combat Drought and Desertification The National Action Programto Combat Drought and Desertification (NAP) (finalized in 2002 and endorsed by Parliament in2004) has been developed to fulfill one o f the obligations of the affected developing country parties underthe UnitedNations Conventions to Combat Desertification (UNCCD). It provides a long-term strategy to address land degradation inaffected areas inGhana. NAP'Smain purpose is to identify the causes of desertification in the country, recommend possible prevention and remedial actions to reduce the impact of drought, and halt the rate of desertification inthe country. Its overall goal i s to "emphasize environmentally sound and sustainable integrated local development programs for drought prone semi-arid and arid areas, based on participatory mechanisms, an integration of strategies for poverty alleviation and other sector programs including forestry, agriculture, health, industryand water supply into efforts to combat the effects o f drought." The core strategy of the NAP i s the establishment of permanent and temporary vegetative cover on the land, taking into consideration the principles of economic growth, environmental sustainability, and enhancedlivelihoods. Although the NAP i s intended to be executed in an integrated manner, it i s presented in seven thematic Action Programs. Eacho f the Action Programs comprises a number of Action Plans, as follow: 1. Land Useand SoilManagement 1.1 Action Plan for LandUse Planning 1.2 Action Plan for Soil andWater Conservation 1.3 Soil Fertility Action Plan 1.4 Action Plan for MiningActivities 2. Management of Vegetative Cover 2.1 Action Plan for the Management of Forest and Woodland 2.2 Action Plan for RangelandManagement 2.3 Action Plan for BushfireManagement 3. Wildlife and Biodiversity Management 4. Water ResourcesManagement 4.1 Water ResourcesAssessment, Monitoring and Usage Action Plan 4.2 Protection of Water Bodies Action Plan 5. Rural InfrastructureDevelopment 5.1 Action Plan for Provisionof Basic Infrastructure 6. Energy ResourcesManagement 6.1 Action Plan for Fuelwoodand Alternative Energy ResourcesManagement 7. Improvement of the Socio-Economic Environmentfor Poverty Reduction 7.1 Action Plan for Improvement of Agriculture Production and Yield 7.2 Action Plan for Developmento fMarkets for Agricultural Products 7.3 Action Plan for CreatingFinancialand Incentive Instruments 7.4 Action Planfor Agricultural Diversification 7.5 Action Plan for Non-Agricultural and Off-farmEnterprises -232- 7.6 Action Plan for Reductiono f PopulationPressureonLand 7.7 Food Security Action Plan 7.8 Action Plan for Promotiono f Access to Inputsto Production 7.9 Action Plan for Capacity Building, Training and Public Awareness 7.10 Action Plan for Drought Management and Mitigation NAPimplementationistheresponsibilityofthe MinistryofEnvironmentandScience.A National DesertificationCommittee is the national coordinatingbody, and i s responsible for the overall supervision and implementation o f the NAP. The focal point i s the National Secretariat to Combat Desertification, and i s based at EPA. Funding mechanisms o ftheNAP include the established NationalDesertification Fund. -233- Appendix 4-9: Key Land Legislation Table A4-9-1: Key Land Legislation Legislation Purpose of legislation Administration o f Lands Act 1962(Act 123) The act seeks to consolidate with amendments the enactments relating to the administration o f stool and other lands. Chieftaincy Act, 1971(Act 371) The act amendsthe statute law onchieftaincy inorder to bringit into conformity with the provisions o fthe Constitution and to make other provisions relating to chieftaincy. ConveyancingDecree, 1973 (N.R.C.D.175) The decreebringsupto date the law relating to conveyancing and simplifies conveyance procedures. FarmLands (Protection) Act 11962 (Act The act provides protection for farmers whose titles to land are 107) defective. Lands Commission Act, 1994 (Act 483) The act establishesthe Lands Commission and provides for the composition, functions, and other relatedpurposes o fthe Commission. LandDevelopment (Protection o f The act protects purchasers o flandas well as their successorsin Purchasers) Act, 1960 circumstances where their titles are found to be defective after they have erected a building on the land. Land and Soil Conservation Ordinance The ordinance provides for the establishment o fcommittees (1953) with powers to preserve andreclaimland and to protect water resources inapprovedareas, and o f further committees to coordinate the work andpolicy therein as well as to make provisions for relatedmatters. LandPlanning and Soil ConservationAct The act amends the Land and Soil Conservation Ordinance and (amended 1957) provides for the establishment o f committees that should promote indesignated areas proper landuse and cultivation for purposes o f erosion control. LandRegistry Act, 1962 (Act 122) The act consolidates, with amendments, the law relating to the registration o f instruments affecting land. Lands (Statutory Wayleaves) Act, 1963 (Act The act provides for the entryon any landfor the purpose ofthe 186) construction, installation, andmaintenance o f works o fpublic utility,andfor the creationofrights ofway and other similar rights inrespect o f such works and for purposes connected with those matters. Land Title RegistrationLaw, 1986 The lawprovides machinery for the registration o ftitle to land (P.N.D.C.L. 152) and interests inland. Local Government Act, 1993 (Act 462) The act establishesandregulates the local government systemin accordance with the Constitution andprovides for other related purposes. National Development Planning Commission The act establishes the NationalDevelopment Planning Act, 1994 (Act 479) Commission under the Constitution andprovides for its composition and functions relating to development planning policy and strategy and for related purposes. National Development Planning (System) The act provides for a NationalDevelopment Planning System, Act, 1994 (act 480) defmes and regulates planning procedure, andprovides for -234- relatedmatters. Office o fthe Administrator o f Stool Lands The act establishesthe Office o fthe Administrator o f Stool Act, 1994 (Act 481) Lands andprovides for the administration o f Stool Lands generally. Public Conveyance Act 1965 (Act 302) The act empowers the President to declare, by executive instrument, an area o f state or stool land as a "selected area" for creating restrictedpurposes and to grant titles to suchlands to persons displaced by natural catastrophes, compulsory acquisition o f land, andreadjustment o fboundaries under the Town and Country planning laws. etc. Public Lands (Protection) Decree, 1974 The decreemakes it an offense to convey or occupy public land (N.R.C.D. 240) without reasonable cause. RentAct, 1963 (Act 220) The act consolidates and amends the law relating to the control o frent and the recovery ofpremises. Stamp Act, 1965 (Act 311) The act reenacts, withamendments, the law relating to stamp duties. State Lands Act, 1962 (Act 125) The act provides for the acquisition o fland inthe national interest and other purposes connected therewith. State Property and Contract Act, 1960 (CA The act provides for the declaration o f areas as industrial areas 6) and the allocation o f landto industrial concerns via leases for industrial development. Stool Lands Boundaries Settlement (Repeal) The act repeals the Stool Lands Boundaries Settlement Decree Act 2000 (Act 587) and gives the High Court originaljurisdiction to determine disputes relating to stool landboundaries. Survey Act, 1962 (Act 127) The act consolidates, with amendments, the law relating to geological, soil, and land survey. Town andCountry Planning (Gold Coast) The ordinance establishes the Town and Country Board, which (Cap. 84) i s tasked with the responsibility o f the orderly and progressive development o f land, towns, and other areas whether urban or rural, and the preservationand improvement o f amenities in these areas. Source: TheAuthors -235- Appendix 4-10: Land Administration Project (LAP) 4.1.2. The Government of Ghana has undertaken a long-term land administrationreform program to improve security o f land tenure; simplify the process for accessing land and making it fair, transparent, and efficient; develop a land market; and foster prudent land management. The Land Administration Project (LAP) is the first phase that lays down the foundation for the implementation o f this long-term land administrationreform. The specific objective of the project is to develop a sustainable and well-functioning land administration system that i s fair, cost effective, and decentralized and that enhances land security. Specifically, it would seek to (a) harmonize land policies and the legislative fiamework with traditional law for sustainable land administration, (b) undertake institutional reform and capacity building for comprehensive improvement in the land administration system, (c) establish an efficient, fair, and transparent system of land titling, registration, land use planning, and evaluation, and (d) issue and register land titles in selected urban and rural areas as pilot to test (b) and (c) and innovative methodologies, including mechanisms that resolve community-level land disputes. The Project comprises the following components: 1. Harmonizing LandPolicy and RegulatoryFramework for Sustainable LandAdministration. 1.1. Revision o f policies laws and regulations for an effective and efficient land administration. 1.2 Strengthening o f civil courts to expedite resolution o f land cases, and developing alternative mechanisms for land dispute resolution. 1.3 Inventory of all acquired state lands and determinationo f outstanding compensation. 1.4 Policy studies: i.Land tenure registrationto formulate government policy on what rights will be registered on landtitles. ii.Divestitureofvestedlands. iii.Financeandfees structure oflandadministrationsystemto formulate government policies on fees and taxes for registrationo f landtransactions. iv. Gender study and analysis. v. Assessment of current land administration services provided by customary land authorities. 1.5 LandPolicy development process 2. InstitutionalReform and Development 11.1 Restructuringo fpublic sector land agencies. 11.2 Decentralizing and strengtheningland administration services. 11.3 Strengthening traditional land administration. 11.4 Strengtheningprivate land sector institutions. II.5 Strengthening land administration, management training, andresearchinstitutions. 3. Improving LandTitling, Registration, Valuation, and Information System -236- III. Developingthecadastreandlandinformationsystems. 1 111.2 Cadastral mapping. 111.3 Establishingmodel landtitling and registrationoffices. 111.4 Improving deed and title registration. III.5 Land use planning and management. 111.6 Establishinga land valuation database. 111.7 Piloting systematic land titling and registration. 4. Project Management, Monitoring, and Evaluation Iv.1 Project coordination andmanagement. Iv.2 Humanresource development. I v . 3 Communication strategy. Iv.4 Monitoringand evaluation, and impact assessment. Recent achievements: . A comprehensive review of the public land agencies laws was completed, and proposals for . restructuring and merging 6 public land agencies under the Land Administration Project (LAP) into one corporate entity i s being drafted. ...Establishment of Customary Lands Secretariat and the strengthening o f existing ones to improve traditional land administration. Set up of four Deed Registries supporting the process of decentralizing the registration o f land transactions and eventually o f title registration. Conducting the process of systematic land titling on apilot basis inselecteddistricts. Traditional boundary demarcation began in selected areas, and stakeholder sensitization and consultations were held. Some key challenges: The LAP faces widespread resistance to change, lack of incentives, and bottom-up pressure for transparency and accountability (inparticular inthe area ofrevenue collection and management). Despite activities to promote awareness and partnerships, many stakeholders (e.g., Parliamentarians, District Assemblies, area councils, traditional authorities, and NGOs) are not familiar with the LAP. The efficiency of the LAPU is severely constrained because of (i) lack of a clear implementation a strategy, (ii) a lack o f key staff, inadequate working facilities, and confusion o f roles between the central LAPU and regional LSA staff, and (iii) lack of reward and incentive system and, which a adversely impacts the implementation o f the LAP. Overall weak capacity of the private sector and a low level o f skills for surveying and land use planning technology and business management have hampered the sector in taking the lead in any field activitiesto survey, demarcate, andinventorylandsunder state trusteeship. -237- Appendix 5. Urban Environment TableA5-1: MWRWH-Central Government Allocationand Expenditures, 2002-2005 2002 2003 2004 2005 Allocation Total budget allocation (billions ofcedis) 623.1 656.2 428.1 968.3 Total budget allocation (as a percent of total 8.4 6.3 3.3 5.2 budget) Total budgetallocation (as a percent of GDP) 1.3 1.o 0.5 1.o Real allocation (2000 prices) 377.0 308.7 176.5 347.8 Real growth -18.1 -42.8 97.0 Actual expenditures Total expenditures (billions of cedis) 884.3 841.4 827.4 Total spending (as a percent of total budget 11.6 8.1 5.5 execution) Total spending (as a percent o f GDP) 1.8 1.3 1.o Total real spending(2000 prices) 1.8 1.3 1.o Real growth -26.0 -13.8 Budget execution rates Budgetexecution 141.9 128.2 193.3 Source: GoG (Appropriation Act 2005), MOEFP. TableA5-2: MWRWH-BudgetaryAllocationsby Departmentand Sources of Fundingin 2005 GoG IGF Total Donor In I n In I n In In In In billions percent billions percent billions percent billions percent of cedis o f cedis ofcedis of cedis Total 92,200 IO0 7,549 100 865,005 IO0 964,954 IO0 Central M o W H General Admin. 15,815 17.2 0 0.0 194,192 22.4 210,024 21.8 RentControl 1,721 1.9 0 0.0 0 0.0 1,723 0.2 HydrologicalServices Dept. 5,904 6.4 0 0.0 0 0.0 5,910 0.6 Ghana Water Company Limited 15,394 16.7 0 0.0 307,613 35.6 323,024 33.5 Department of Rural Housing 4,207 4.6 7 0.I 0 0.0 4,219 0.4 Public Servants Housing Loans Scheme 4,457 4.8 411 5.4 0 0.0 4,878 0.5 Board Technical Services Center 504 0.5 0 0.0 0 0.0 505 0.I Water ResourcesCommission 1,850 2.0 2,353 31.2 0 0.0 4,236 0.4 Community Water & SanitationAgency 16,480 17.9 0 0.0 363,200 42.0 379,698 39.4 Architects Registration Council 1,458 1.6 150 2.0 0 0.0 1,612 0.2 Public Works DeDartment 24,410 26.5 4,628 61.3 0 0.0 29,126 3.0 Source: GOG,AppropriationAct, 2005 -238- FigureA5-1: GWCL-Budgetary allocationsby sourcesof fundingin 2005 (percentage) I GoG IGF Donor Source: GOG,AppropriationAct, 2005 TableA5-3: MLGRDE-Central GovernmentAllocationand Expenditures, 2002-2005 2002 2003 2004 2005 Allocation Total budget allocation (inbillions of cedis) 175.6 273.7 306.5 354.3 Total budget allocation (as a percent oftotal 2.4 2.6 2.4 1.9 budget) Total budget allocation (as a percent of GDP) 0.4 0.4 0.4 0.4 Real allocation (2000 prices) 106.2 128.7 126.4 127.3 Real growth 21.2 -1.8 0.7 Actual expenditures Total expenditures (inbillions o f cedis) 427.8 581.6 408.1 Total spending (as a percent oftotal budget 5.6 5.6 2.7 execution) Total spending (as a percent of GDP) 0.9 0.9 0.5 Total real spending (2000 prices) 258.8 273.6 168.3 Real growth 5.7 -38.5 Budget execution rates Budgetexecution 243.6 212.5 133.1 w Source: GoG (AppropriationAct 2005) -239- Appendix 6. Conclusion Table 6A-1: ProjectedDevelopmentAssistanceinthe Forestryand Wildlife Sector, 2006-2008 (in millionsof US%) 2006 2007 2008 Total 22.9 15.5 11.4 CEA (WorldBanWAFD) 0.4 0.0 0.0 NorthernSavannaBiodiversityCons. (WorldBanWGEF) 1.o 0.5 0.0 ForestBiodiversity(GEF) 2.6 0.0 0.0 ForestSector DevelopmentProjectI1(DFID) 1.8 0.0 0.0 Reforestation,identifyenvironmentalhot-spots(USAID) 1.1 0.0 0.0 ProtectedAreas DevelopmentProgram(EU) 1.4 1.4 1.4 6thMicroproject(sustainablecommunitiesNRM)(EU) 5.2 5.2 5.2 Enablesustainableforest use (EU) 0.7 0.7 0.7 VERIFOR (EU) 0.6 0.6 0.6 ConservationofBiodiversityinthe HighGuineaForest 0.4 0.4 0.4 (FrenchEmbassy) Wildfire Management(RNE) 1.9 1.9 0.0 Wildlife DivisionSupport(RNE) 1.7 1.7 0.0 Agriculture andNR Progam(ForestLivelihood& Rightsfor 0.9 0.9 0.9 Sustain.NRM)(CARE) Forestsfor the PeopleCampaign(CIDA, CARE Canada) 0.1 0.0 0.0 Forestmanagement; support(GTZ/KfW/DED) 1.9 1.9 1.9 Centrefor Biodiversity(RNE) 0.4 0.0 0.0 GhanaEnvironmentAssessment Project(RNE) 0.5 0.0 0.0 Community-basedNRM(Wildlife) (RNE) 0.4 0.4 0.4 GhanaNationalCapacity(UNDP/GEF) 0.1 0.0 0.0 Source: DP's E N M involvement in Ghana 2005, GPSSupport Overview Table 2005. Table 6A-2: ProjectedDonorAssistanceinthe Mining Sector, 2006-2008 (in millionsof U.S.%) 2006 2007 2008 Total 12,812,500 6,250,000 6,250,000 Supportto the miningsector (EC) 12,812,500 6,250,000 6,250,000 Source: GPSSupport Overview Table 2006. -240- Table 6A-3: ProjectedDonorAssistanceinthe Land Sector, 2006-2008 (in millionsof US$) 2006 2007 2008 Total 10.9 10.9 11.6 LandAdministration Program (World Bank/DIFID/CARE) 6.0 6.0 6.0 Community-basedRural Dev. Project (AFD) 2.1 2.1 2.1 Ghana Environment Management Project (GEMP) 0.7 0.7 1.4 Supportto Agric. Sector (DFID) 1.4 1.4 1.4 GEF Small Grants Program(UNDP/GEF) 0.4 0.4 0.4 Sustainable LandManagement (UNDP/GEF) 0.2 0.2 0.2 Sustainable Use ofNR and good environmentalmanagement 0.2 0.2 0.2 (UNDPIGEF) Source: DP's ENRM involvement in Ghana 2005. Table 6A-4: ProjectedDonor Assistanceinthe Urban Sector, 2006-2008 (in millionsof U.S.$) 2006 2007 2008 Total 49.93 74.09 73.1 Urban Water (World Bank) 15 20.38 23.83 Urban Water (NDF) 0.6 1.7 1 Small Towns Water Supply & Sanitation (World Bank) 8.99 9.12 7.89 Water Project (RNE) 6.82 6.82 6.82 Water Project (Spanish Embassy) 3.02 6.03 3.02 I1UrbanEnviron. Sanitation Project (World Bank) 14.5 14.5 14.5 I1UrbanEnviron. Sanitation Project (NDF) 1 2.2 2.7 Accra SewerageImprovement Project (ADB) 0 13.34 13.34 Source: GPSsupport Overview Table 2006. -241- References Abbey, D.et a1(1995). Long-Term Ambient Concentrationsof Particulatesand Oxidants and Development o f Chronic Disease ina Cohort o f Nonsmoking California Residents. Inhalation Toxicology, Vol 7: 19-34. Adams, Jonathan S. and Thomas 0. MacShane. 1996. Mytho f Wild Africa: Conservation without Illusion. Los Angeles:University of California Press. Adolph B., Alhassan Y., et al. 1993. 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