The conversation about infrastructure in Ghana is a good one. It is particularly refreshing to note that Ghanaians are discussing such ideas about development beyond emotions and partisan views.
All over the world, development economists agree that it is the critical infrastructure in any country that unlocks the real growth and prosperity of the economy.
Inter alia, it is the major difference between developed countries and less developed countries (LDCs). It is on this basis that I proceed to share some views on key themes surrounding the conversation to build an airport in Cape Coast.
In the medium to long term, an airport in Cape Coast proves to be very viable and has a strong economic case. This is why proper planning and construction should begin as soon as possible.
A serious development plan cannot wait for more than 18 months to complete all feasibility studies and implement this project.
The local economy (i.e. the economic structure) of Cape Coast and Central Region is at a ‘sweet spot’ of development that could be further propelled by an infrastructure project such as an airport.
The primary sector in Cape Coast predominantly consists of fishing activities, a relatively moribund industrial sector and a vibrant services sector dominated by tourism, education and public institutions.
A critical look at the structure, offers an opportunity to boost the economy moving forward if we want create wealth in the region. Given that, there is an industrialisation drive ongoing, an airport could potentially increase foreign direct investment in the region.
Globally, there is an interesting linkage between the aviation sector and the tourism sector. It is estimated that on the average, the aviation sector creates about 65.5 million jobs.
Out of this number, 36.7 million (approximately 56%) can be found in the tourism sector. This is what experts refer to as the ‘catalytic effect’ of the aviation sector.
This finding is further corroborated by a report of the International Air Transport Association (IATA) on ‘the Economic benefits and Performance in the Travel and Tourism Competitiveness Index’.
The report states that with 51% of international tourists traveling by air, the aviation sector is critical to the tourism industry, which in turn is an important source of economic growth for many countries, particularly developing ones.
The report further states that globally, air transport supports about 34.5 million jobs within tourism. The ‘Year of Return’ that was recently held created high revenues that could have been multiplied if such infrastructure was in place.
Let us zoom into the potential market for air travel towards Cape Coast.
The flow of tourists into the Central Region and Cape Coast in particular is very high and significant number of the tourism flow is directed towards the Central Region.
The region at large is host to the most celebrated and well-known cultural festivals and street carnivals in the whole of the West Africa sub region. Notable among these festivals and street carnivals are Oguaa Fetu Afahye, Edina Bakatue, Simpa Abokyir, Mankessim Borbor Mfantse Festival and Orange Friday.
Tourists travel from all over the world to catch a glimpse of the rich display of culture and tradition during such occasions. During such festivities, all hotels in Cape Coast and its surroundings are full to its capacities.
There are over 15,000 international tourists visiting Cape Coast and the region as a whole on a monthly basis. This figure is expected to rise due to the successful year of return and beyond the return project, which is expected to last a decade.
In 2014 alone, the data of visitors to major tourism sites show that the highest arrivals in Ghana were recorded at the Kakum National Park and the Cape Coast Castle.
Clearly, a strategic local economic development plan that aims at creating wealth in the Central region will seriously consider an airport whilst enhancing the tourism sector.
Again, Cape Coast is arguably ‘the hub’ of education in Ghana. It is a confluence of the crème de la crème of educational institutions in the country. The number of people who travel from all over Ghana and other countries to study in Cape Coast is big.
During academic periods, which span several months in the year, Cape Coast and the Central Region represent a microcosm of Ghana. Great secondary Schools like Mfantsipim School, Wesley Girls High School, Adisadel College, St. Augustine’s College, Mfantsiman Girls SHS, Holy Child SHS etc. and other institutions like University of Cape Coast and Cape Coast Technical University all have students who come from all over Ghana and other countries.
The movement of those going to Cape Coast from different places can be made less stressful with air travel.
Generally, the level of income of customers in known to influence demand for air travel. The perception that Cape Coasters are poor (i.e. are low-income earners) and therefore cannot afford flights is not factual. Cape Coasters who may patronise air travel are not the only ones living in Cape Coast now.
There are Cape Coasters all over Ghana and the world that form a big segment of the high or middle-income customers for flights. That is even when you want to analyse the market based on a narrower lens that only Cape Coasters will travel through such a route.
In reality, it will not be the case and any proper demand forecast will not be estimated with that assumption. Moreover, the financial viability analysis of operating an air route to, through and from an airport in Cape Coast with incomes and cash flows is very stochastic in nature.
Beyond this, demand for air travel is also an issue of tastes and preferences and therefore with the option of using roads or flights, a customer along any route from Ghana or abroad could have the luxury to choose air travel based on circumstances or convenience.
The plausible general demand for air travel along a route towards Cape Coast and other airports will be very high given general factors like migration flows, job mobility etc.
Airlines will also have the opportunity to boost profitability by adding a new segment of customers en route to Cape Coast and other places depending on route planning and internal business economics (i.e. pricing, cost and revenues).
This will largely depend internal strategy and marketing.
1. Employment and Incomes- Such megaprojects create huge employment in the short, medium and long-term. In addition, these jobs, which cut across the project’s planning, construction and operational phases, will create many jobs, which are direct, indirect and induced at each phase.
The dynamic employment potential through the local economy in Cape Coast, Central Region and the country at large will therefore be huge.
Many financing models and possible financing structures can be used. It may not be necessarily or entirely financed by the state. A variety of airport ownership and governance models has proven successful all over the world.
In many countries, governments have decided that, under the right economic conditions, they can successfully turn to the private sector for the financing and operation of airport infrastructure.
In modern day infrastructure financing, given the continuous contraction of fiscal space, governments do not use the conventional means (e.g. borrowing and taxes).
Rather, strategic partnerships leveraging on private sector finance and expertise through what is termed as PPP (Public-Private-Partnerships) financing models are being used.
Given that an airport is an income-generating project when properly structured, it can pay for itself. In many jurisdictions, various forms of Build-Operate-Transfer (BOT) models are being used for such big infrastructure. The options and strategies are many.
Is it a Priority?
The conversation on ‘priority’ should be situated in a bigger and proper context. It is not a rule in local economic development to provide direct interventions such as food, roads, railways etc. before providing big infrastructure like an airport. No.
If the approach is always linear, one could use the same logic to say that Ghana should not have Kotoka International Airport because not all the roads in Accra and Ghana are fixed.
Usually, such mega projects are undertaken because of their strategic importance to the domestic economy whilst you pursue other mini-interventions.
So constructing an Airport in Cape Coast is possible and can be paralleled with other projects. It is a matter of proper strategic and economic planning. A piecemeal approach to development is not effective especially if we want to think long-term as a country.
In fact, through the reverse, such strategic projects can lessen the burden on any government to provide what may be referred to as the ‘basic things’ or business-as-usual projects such roads and railways.
The bigger projects naturally make the economy take off through job creation and income generation by the efforts of the private sector and through Foreign Direct Investments (FDIs).
For instance, an airport in Cape Coast will direct attention, ideas and capital of entrepreneurs and foreign investors to Cape Coast to invest in a local economy with so much untapped potential.
In fact, modern transport systems are actually planned and executed in an integrated manner to take advantages of cost and engineering efficiencies.
Again, in our current world of economic globalization, a country’s economic competitiveness is hinged on such infrastructure that facilitates economic activity.
These perspectives should also inform the urgency with which we consider such projects. In the current global economy, speed and efficiency is critical if you can stay ahead of competition especially in areas like FDIs, tourism and trade.
Wealth Creation and poverty reduction are achieved when you do the ‘big things’ that have a multiplier effect through the local economy.
Beyond the technical work required for the project, the real differentiator or hurdle will be the political will to start.
It is possible and feasible. If not now, when?
Festus Brew Quansah is an expert in Finance and International Business.