Closed Compact Report: Ghana Compact | June 2017

Compact Changes

The Ghana Compact created more than 1,200 farmer based organizations (FBOs), trained nearly 66,930 farmers in commercial agriculture, enhanced rural credit and banking services, and constructed new roads and post-harvest facilities. As originally proposed and signed, the compact consisted of 3 large projects broken down into 12 activities and more than 20 discrete activity components. The size and complexity of the compact made successful implementation challenging, especially since the compact moved quickly 1 from the development process to implementation. Additionally, many major contracts were signed after the global financial crisis drove up the cost of both services and works in 2008. As a result of these factors, the compact saw several major restructurings following signing in order to maximize the effectiveness of the defined budget envelope.

  • In January 2009, Ghana and MCC reallocated $31.2 million across project activities to account for increased costs related to construction work and changes made to the original design of some projects. Major changes included cutting the budget for Irrigation Development under the Agriculture Project by 22.4 percent following a shift in design. The original plan was to irrigate 5,060 hectares with new community irrigation structures (i.e., small dams and retention ponds), the need for which would be determined by the business plans developed by local farmer organizations known as FBOs. However, delays meant that waiting for FBOs to identify the structures, undertake the necessary preparatory assessments and design, and contract to construct the structures, would prevent the structures from being completed within the compact period. Therefore, MCC and the Government of Ghana opted to rehabilitate existing irrigation structures in the Intervention Zones rather than create new structures.

    At the same time, funding for the scalable investments under the Community Services Activity was reduced by approximately 20 percent to accommodate escalating costs elsewhere in the compact. The number of kilometers of feeder roads to be rehabilitated under the compact was decreased from 945 to approximately 360; however, the budget still had to be increased by 20.4 percent due to both higher construction costs and upgrading the design standards for many of the feeder roads. The budget for upgrading the N1 Highway under the Transportation Project was increased by approximately 30 percent to accommodate higher costs of construction inputs like steel and concrete and changes in design, and the number of kilometers of trunk roads improved under the compact was reduced from 230 to 75 after many of the targeted road segments were improved with financing from other sources.

  • In January 2010, Ghana and MCC reallocated $39.7 million from other compact activities to accommodate higher-than-expected construction costs for upgrading the urban N1 Highway and trunk and feeder roads as well as improving the Lake Volta ferry service. The changes were made to ensure activities already underway could be completed within the compact period while those that were designed to be easily scalable were reduced in scope. Decisions about which programs to scale back were also made based on plans from other development partners to increase their interventions in certain areas.
  • The Land Activity experienced several re-scoping exercises throughout the course of implementation. The original budget of $10.69 million supported:
    1. pilot land title registration of rural lands;
    2. helping the Ghana Judicial Services reduce the backlog of land-related court cases;
    3. a training and public awareness campaign focused on land tenure issues and property laws; and
    4. acquisition of technical equipment and physical infrastructure to support the Ghana Lands Commission.

    In 2009 and in 2010, the Land Activity budget was reduced to $3.43 million. To accommodate this reduction, the scope of the land title registration of rural lands was reduced from nine pilot title registration areas to two. A few minor reallocations later increased the budget slightly to $3.8 million. The Land Activity experienced one last change in scope in September 2011, when the Government of Ghana requested and received approval from MCC to terminate the land title registration activities in the community of Tuunayili of the Savelugu-Nanton District due to a land tenure dispute between neighboring communities and threats of violence that arose thereafter.

  • In January 2011, the Government of Ghana and MCC made the decision to move forward with construction of only two irrigation systems out of three with completed feasibility studies in the Agriculture Project. This reduced the total number of irrigated hectares funded under the compact from 5,060 to 2,360. This re-scoping was the result of delays in starting construction of the irrigation systems, challenges in coming to agreement on appropriate management structures among a diverse set of stakeholders, poor contractor performance, and increasing construction costs.
  • The Credit Activity was originally programmed as a $58.4 million activity under the Agriculture Project and was subsequently reduced to $31 million during the 2009 re-scoping. Of that total amount, $22 million was available to financial institutions, with the compact funding 100 percent of the loans they then made with those funds to farmers on a 50/50 risk sharing basis with Participating Financial Institutions (PFIs). As lending started in October 2009, concerns arose about the ability of the Bank of Ghana, which was implementing the program, and the PFIs to manage the program effectively. Follow up reviews and audits revealed weaknesses in institutional oversight and program management, leading MCC to stop further disbursements for the activity. Implementation of the activity did not meet MCC standards which led MCC require a refund of the amount disbursed for the program, minus amounts repaid or recovered and reallocated to other compact projects, which totaled $6.7 million.
Footnotes
  • 1. The Ghana Compact was signed in August 2006 and entered into force in February 2007 – a timeline of 6 months. This was not unusual for compacts developed at that time. However, on average, MCC’s compacts now include a preparatory period of about a year to 18 months between signing and the beginning of implementation.