Labour Casualisation and Youth Employment in Ghana’s Formal Private Sector*
Gertrude Dzifa Torvikey1
This article explores the link between labour casualisation and youth employment in Ghana’s formal private sector. It uses the case of Blue Skies Holdings Ltd, an agro-processing company in Ghana. The article shows the contribution of Blue Skies to youth employment in Ghana. However, changes in the global production of the company’s primary export commodity and local shocks created new challenges for the company. The article explains how local economic realities, global competition, and local shocks impact on the company’s ability to maintain permanent employment for its workers. It recommends that government must design policies to incentivise successful companies to create more jobs but without consigning youth to insecure employment conditions.
Keywords: Ghana, youth employment, labour casualisation, private sector, Blue Skies Holdings Ltd.
This article explores casualisation of youth2 labour and the precarity of employment in Ghana’s formal private sector, through a case study of Blue Skies Holdings Ltd, an agro-processing firm. Like many other African countries, Ghana is experiencing ‘jobless growth’, where economic growth is not matched with job creation in the formal sectors of the economy (Aryeetey and Baah-Boateng 2016). The jobless growth phenomenon shows up more in the casualisation of jobs and their vulnerability to shocks, rather than extremely high levels of general joblessness. Some analysts argue that this makes the situation particularly serious, because the insecure nature of jobs in the formal sector hides the gravity of the country’s youth unemployment crisis (Alagidede, Baah-Boateng and Nketiah-Amponsah 2013). The ‘youth bulge’ compounds the unemployment challenge where an estimated 20 per cent of the population is between 15 and 24 years old (Ghana Statistical Service 2014). These interconnected opportunities and problems have seen the implementation of training programmes for youth to transition into the job market (Darkwah 2013).
Since the 1980s, Ghana has implemented economic reforms that have transformed the nature of its economy in significant ways. The World Bank-inspired Structural Adjustment Programmes (SAPs), which were known in Ghana as Economic Recovery Programmes (ERPs), reduced the state’s involvement in direct production, with the expectation that the private formal sector would drive economic growth and create jobs. Since the 2000s, Ghana’s economy has seen positive growth, especially in 2011 when commercial oil production started. Both public and private sectors have seen marginal increases in employment, but job creation in the formal private sector has been described as negligible (Obeng-Odoom 2012; Francis and Honorati 2016). A pattern of employment informalisation and labour casualisation has spread from the private informal sector to the formal sector as well.
Another significant feature of Ghana’s economic growth trajectory is the decline in the contribution of the agriculture sector to the national economy. In 1998, the agriculture sector contributed 30.72 per cent to GDP while in 2015, the figure was 20.28 per cent. Economic growth in agriculture was 5.1 per cent in 1998 and 7.4 per cent in 2008, but declined to only 2.5 per cent in 2015. There are important linkages between growth in the agricultural private sector and job creation, especially where companies are linked to industrial production and exports (Baah-Boateng 2013; Fox et al. 2013; Hanson and Leautier 2013; World Bank 2018). Aykut et al. (2017) contend that the agriculture sector in Ghana remains highly relevant as an engine of job creation, notwithstanding the government’s tilt towards the extractive sector. However, as this article will show, the agricultural sector is susceptible to stresses and periodic shocks that are related to a plethora of factors, including land use changes, crop failures, and low rates of investment, among others. These factors have an impact on the employment-generating capacity of the agricultural sector, which employs about 42 per cent of economically active people in the country (Ghana Statistical Service 2013).
This article uses the case of Blue Skies as a lens to study casualisation and youth employment in Ghana. Blue Skies is a formal private sector company that employs both skilled and unskilled labour. It processes fruits, which are sourced primarily from smallholder growers. The company’s products are marketed locally, but principally exported to international markets. Blue Skies has expanded considerably over the last two decades and has demonstrated the capacity to be a key employer of youth, especially young women. This makes it an important case to study how the realities of private enterprise shape youth employment in Ghana.
2 Methods and data sources
Data were drawn from previous research under the Land and Agriculture Commercialisation in Africa (LACA) Ghana Country Project, which was conducted between 2013 and 2015. This project examined different agricultural commercialisation models and their implications for employment, labour, land, and gender relations (see Torvikey, Yaro and Teye 2016). During the period, company officials and workers were interviewed. Other primary data included statistics on employment trends in the company. To bring the research up to date and address additional questions, an in-depth interview was conducted in July 2018 with a Blue Skies official, to understand recent developments in the company’s operations and their implications for employment in the company. Secondary data sources included statistics on the performance of various sectors of the economy obtained from the Ghana Statistical Service and a review of national policy and programme documents on agriculture investments, exports, and trade regimes in the country.
The structure of the article is as follows: Section 3 provides a conceptual perspective on labour casualisation and Section 4 gives a brief description of Blue Skies, including the historical and macroeconomic context of its growth. This material is then reviewed briefly in Section 5 to draw out insights relating to the private sector’s role in job creation, and the role of government policy frameworks that enabled the company to launch and grow. This is followed by a discussion in Section 6 of specific vulnerabilities Blue Skies was exposed to and its response, and also an analysis of its employment trends and patterns. Section 7 concludes by emphasising lessons and policy insights from the case.
3 Labour casualisation and youth employment
Research on youth employment and unemployment has focused on the inability of youth to find work; limited attention has been paid to underemployment (Ayele, Khan and Sumberg 2017), including a variety of casual, outsourced, contract, temporary, and seasonal work. Generally, this type of work is known as nonstandard work, in contrast to standard work, which connotes full-time employment (ILO 2015). This article focuses particularly on an increasing trend towards temporary, casual, and contract work, in order to explore the link between job casualisation in the private sector and the prospects for youth employment in Ghana.
The trend towards casual and non-permanent employment in the private formal sector has been mapped since the late 1970s in developed countries such as the USA, when it was yet to be a feature in many developing countries. In African countries, precarious employment has largely been associated with the informal sector (see Gukurume, this IDS Bulletin). In Ghana, the concern about the incidence of nonstandard work has rightly focused on the informal sectors of the economy. Hart’s (1973) seminal work, which examined the relationship between the formal and informal sectors in Ghana, is a watershed in the discussion of the features of different types of work in the country. Hart (ibid.) highlighted the prevalence of informal work by formal wageworkers, which helped them to cope with the low wages paid in the formal sector. Yeboah (2017) also explored the expansion of nonstandard work in the informal sector, emphasising the precarity of migrant youths’ working conditions in urban Ghana. Tsikata (2011) has explained how specific sectors of the informal economy, characterised by nonstandard work patterns, are being institutionalised by recruitment agencies.
Theron (2010) has two kinds of informality in relation to employment. ‘Informality from below’ is associated with self-employment in the informal sector. ‘Informality from above’ refers to the involvement of labour contractors in the recruitment and management of labour for and on behalf of the formal private sector. In the latter form, while the worker provides labour for the principal, such workers do not become employees of the principal. Precarious employment conditions are becoming more evident in the formal private sector, where work contracts are increasingly being casualised (Aye 2017). This strategy is an alternative to the use of a standard permanent contract to recruit youths (Anyidoho and Adomako Ampofo 2015). This trend has been observed in the formal private sectors of developing countries where there are weak labour laws. For example, Houeland (2015) has found that casualisation of labour is an increasing trend in Nigeria’s oil industry. This has contributed to grievances against private sector employers within the industry, often leading to protests and the increasing involvement of labour unions in politics, as they seek to improve job security for employees (Lawrence 2018). In this article, I argue that informalisation from above is a strategy, adopted by companies within the private sector, to cope with economic uncertainty and fluctuations in the business cycle.
In Ghana, the trend towards nonstandard work has been traced back to the labour layoffs that began in the 1980s on the back of the SAPs. The trend has also been driven by an oversupply of labour and low rates of growth in the private sector (Fox, Senbet and Simbanegavi 2016). Casualisation of working conditions has become common for both skilled and unskilled youth labour. Businesses use casualisation to avoid the stringent labour laws that protect permanent employees, which helps them to reduce production costs and cope with a challenging business environment. This has consequences for youth employees in terms of job insecurity and underemployment, contributing to the overall youth unemployment challenge in Ghana.
Casualisation has been observed as a persistent problem in export processing zones (EPZs), where governments create special regulatory frameworks to stimulate the establishment and growth of export-oriented businesses. Obeng, Wrigley-Asante and Teye (2015) in a study of EPZs in Ghana found that while many jobs are created in the zones, jobs are also lost at the same rate. Labour casualisation as well as contract working are becoming normal in several sectors of the Ghanaian economy, such as the financial, mining, and telecommunications sectors (Boampong 2005). This article focuses on a firm in the agro-based sector, which is a particularly important employer of youths.
4 The Blue Skies company
Blue Skies Holdings Ltd was established in 1998 by Anthony Pile, a British businessman, and Dei Tumi, a Ghanaian entrepreneur. The company was created to process fruits for export. It was one of the first private sector enterprises to establish a factory in an EPZ in Doboro, near Nsawam in Ghana’s Eastern Region. This was a remarkable venture at a time when other companies were exporting only unprocessed raw fruits. Blue Skies represented a daring attempt to upgrade the performance of a Ghanaian raw materials producer and participate in value addition. Participation in higher links of the value chain of basic commodities is recognised to have a positive impact on employment generation for developing countries (Bammann 2007).
Today, Blue Skies accounts for over 90 per cent of cut fresh fruit exports from Ghana (Gatune et al. 2013). The company supplies freshly-cut fruit products to major European retailers such as Spar, Marks and Spencer, Carrefour, Ocado, Waitrose, Co-op Food, Sainsbury’s, Asda, and Monoprix in destinations in the UK, Switzerland, Sweden, France, Italy, and The Netherlands, among others.
The successful establishment and growth of Blue Skies was enabled and facilitated by a number of policy and regulatory measures. In 1975, the Lomé Convention granted special concessions allowing African, Caribbean, and Pacific (ACP) producers to export some products, including agricultural products, into European Economic Community (EEC) markets, at a zero rate of import duty (Koning 1995; Laaksonen, Mäki-Fränti and Virolainen 2007). During the 1980s, export diversification was identified as a solution to reduce Ghana’s exposure to price fluctuations of commodities such as cocoa, and the horticultural sector was a beneficiary of the new thinking, among other sectors (Agyei-Sasu et al. 2013). In 1995, Ghana’s Free Zone Act (Act 504) (GoG 1995) established a number of EPZs across the country, which were designed to attract investors to the export processing and manufacturing sectors through the provision of specialised incentives such as a ten-year tax exemption, and other concessions, such as the freedom to repatriate profits. The entrepreneurs behind Blue Skies were direct beneficiaries of this new dispensation, and the company was established just three years after the Act was passed. Between 2004 and 2010, at least seven donor-sponsored programmes invested a total of US$1 billion to boost horticulture production, marketing, and export in the country (Jaeger 2011).
The Blue Skies company location, close to the Doboro-Nsawam enclave, is also significant for the success of the new venture. The area had become an important pineapple-producing hub after a state-owned company (SOC), Nsawam Cannery Ltd, was established there in 1965. Nsawam Cannery Ltd was privatised in 1995 as part of a liberalisation policy, and the newly privatised company did not survive long; however, the local area continued its active production of pineapples for the local market.
5 Growth, competition, and crisis in the 2000s
Traditionally, Smooth Cayenne and Sugarloaf were the major pineapple varieties grown in Ghana up to the early 2000s. Smooth Cayenne is an export variety that was popular with consumers in Europe. Blue Skies exported the Smooth Cayenne variety to Europe principally in fresh-cut pieces, which were the company’s most important export product. In 1996, the Del Monte Company introduced the MD2 or Super Sweet pineapple variety, also known as Del Monte Gold, which was designed explicitly to break into the European market. MD2 was immediately popular with consumers and processors, with a ‘uniform bright gold colour, sweeter taste, four times vitamin C content, lower fibre, lower acidity, thinner skin, smaller fruits at an average of 1.5kg each, and longer shelf life’ (bin Thalip, Tong and Ng 2015: 2). While the quality of MD2 was considered comparable to Smooth Cayenne, its extended shelf life and suitability for sea transport made it possible for efficient, industrialised pineapple growers in Costa Rica to rapidly seize a significant share of the European market (Whitfield 2017; bin Thalip et al. 2015; Danielou and Ravry 2005).
The effect on Ghanaian pineapple producers and exporters was dramatic. Between 1994 and 2004, Ghana’s pineapple exports to the European Union (EU) recorded a cumulative growth of 172 per cent, reaching an annual volume of 71,000 metric tonnes (MT). Just four years later, in 2008, Ghanaian pineapple exports had plummeted to 35,000MT per annum. Blue Skies was significantly affected. Many of the smallholder farmers who were the company’s suppliers were pushed out of business and their lands were acquired by companies engaged in large-scale production and export. Since the switch from Smooth Cayenne to MD2 involved a capital investment, only resource-endowed farmers and pineapple-exporting companies that ran their own farms were equipped to adopt the new variety (Achaw 2010; Mensah 2014; Whitfield 2017). However, the decline in pineapple production after the mid-2000s coincided with an increase in consumer demand for mangoes in the EU, especially in the UK and France (CBI 2009; Araújo and Garcia 2012). Blue Skies seized the opportunity to shift the bulk of its production from pineapple to mango. Once again, the company’s location in the Eastern Region placed it close to the most important mango production hub in Ghana, in the Yilo Krobo District, where projects implemented by the Adventist Development and Relief Agency (ADRA) and the United States Agency for International Development (USAID) had supported farmers to produce mangoes for export and the domestic market (Yidu and Dzorgbo 2016).
Having successfully navigated the competitive threat posed by MD2, after 12 years of fluctuating growth, in 2010 Blue Skies experienced a series of shocks that tested its resilience and its capacity for sustained growth and employment creation. First, agricultural problems appeared in key supply areas. Papaya production in the country was hit by an outbreak of papaya mosaic disease. Meanwhile, mango production failed in Senegal, which is one of the West African regional sources of the crop when Ghana’s production is off-season. Second, British Airways workers went on a three-day strike in May 2010 which affected the daily air-freight of products. The most devastating problem occurred when an Icelandic volcano erupted, creating a huge ash cloud that disrupted all flights to and from Europe between 15 April and 21 April, with severe consequences for exports of perishable goods. Oxford Economics (2010) estimated the loss to countries such as Ghana, Kenya, and Zambia as US$65 million in perishable goods export revenue. Blue Skies were reported to have lost £100,000 per day during the crisis, amounting to an estimated total cost to the company of around £3 million. While the company made profits before tax of Ghc 2.37 million in 2008 and Ghc 3.36 million in 2009, in 2010 the company incurred a loss of Ghc 712,431 (see Blue Skies 2011). At the height of the crisis, Blue Skies shut down its processing unit, and 1,500 of its workers were temporarily laid off (New Agriculturalist 2010).
6 Coping in times of crisis: the road to labour casualisation in the Blue Skies company
Blue Skies started with good prospects for growth and job creation, including employment opportunities for youth. The workforce rose from 35 in 1998 to about 4,000 in June 2018.3 Almost 70 per cent of the firm’s employees work in its production unit, which is the nerve centre of the company.4 Sixty per cent of Blue Skies workers are women; the company’s workforce also has a very youthful structure, with 65 per cent of employees falling within the 18–29 age category and 20 per cent in the 30–49 age group, while those above 50 years of age account for 15 per cent.5 The company has built an extensive supply chain with 150 smallholder farmers, from whom it obtains the bulk of its fruits for processing. The inclusion of smallholder farmers in the supply chain also has an impact on youth employment in farming communities (Torvikey et al. 2016).
Initially, the International Labour Organization’s (ILO) Conventions6 on workers’ rights governed employment regulations in the Free Zones. The conventions called on ratifying member states to ensure job security for workers (Demaret 2013). Consequently, companies such as Blue Skies signed permanent or fixed contracts with most of its employees. However, the past decade has seen a decisive shift in the composition of the company’s workforce, which is now predominantly casualised (see Table 1). Casual employees are hired on short-term contracts of five months while contract workers on the other hand are employed on similar pay and conditions as permanent workers, but may be laid off when the company needs to cut production. Permanent workers have greater job security.
The number of people employed by Blue Skies fluctuates routinely during the year. This is due to fluctuations in the volume of processing and packaging to be done. The company’s production schedule is governed by the seasonality of fruit production in source regions and consumption patterns in Europe; for example, mango and pineapple production peaks from April to September, while the peak summer period for sales in Europe starts in June. Consequently, the workforce statistics are usually presented weekly rather than monthly or annually. Week 24, in mid-June, is usually the peak period for the company’s processing plants, therefore Table 1 presents the one-week snapshot for that week in each year from 2007 to 2013.7 The statistics show that the number and proportion of contract workers and permanent employees in the workforce has declined substantially, especially in the period since 2009.
The trend towards casualisation can be explained with reference to policies on economic development and labour laws. Firstly, casualisation coincided with the expiration of the company’s ten-year tax holiday allowed under the Free Zone Act. Currently, upon expiration of the tax concession, Free Zone companies pay 25 per cent and 15 per cent on incomes earned from foreign and domestic sales respectively (PwC 2017). This change in fiscal status reduced the company’s profit margins.
Casualisation was one strategy that the company adopted to cope with tighter operating conditions. Part 74(1) of the Labour Act 2003 (Act 651) (GoG 2003) stipulates that temporary (contract) workers must be made permanent once they have worked for the same employer continuously for six months. Part 73(1) of the same piece of legislation states that ‘an employer may hire a worker on terms that suit the operations of the enterprise’ (GoG 2003: 27). Casual contracts of no more than six months’ duration could be synchronised with the seasonality of production, so that workers could be hired to work during the annual peak of production and laid off at the end of the season. This group of seasonal workers is likely to include many of the youth who constitute the majority of the Blue Skies workforce.
According to company representatives, the transition to more casual terms of employment was also driven by concerns about worker agitation and court action against the company. Over time, the company had experienced a gradual change in the educational background of its workers. Youths with university degrees began to seek and gain employment with Blue Skies. At the same time, trade unions acted upon the enactment of the Labour Act 2003 by educating workers about their employment rights. Educated youths in the Blue Skies workforce began to agitate for permanent employment status. To forestall potential court action, the company management decided to prioritise casual working arrangements that would suit the seasonal nature of its operations.8
The decline in Ghanaian pineapple production also affected the year-round availability of fruits for local processing. A company official explained,
We now import MD2 pineapple from Costa Rica into the UK to be processed there, since we do not have enough in Ghana. Currently, 60 per cent of our MD2 is processed in the UK and the rest in Ghana.9
At the same time, the company had to commit resources to start its own farming operations, reversing its previous business plan of sourcing fruits from smallholder farmers. As a result, Blue Skies operates 1,800 acres of pineapple production and 100 acres of mango farms, in various regions. Youths are employed on these farms, but only as casual wage labourers.
The Blue Skies case demonstrates two dimensions that affect youth employment and casualisation. On the one hand, the fact that the company continues to operate, and to employ 4,000 people, including a majority of female youths, suggests a story of success in entrepreneurship, technological upgrading, export market development, and job creation. On the other hand, the casualisation trend, in response to various structural stresses and shocks, has allowed the company to achieve the flexibility it believes it needs to hire and fire workers in response to fluctuations in its business cycle. For the many workers employed by the company, including many youths, this means less job security.
7 Conclusions and policy insights
Employment casualisation is an aspect of the youth employment challenge that is not well handled in policy frameworks and programme documents. Demand- and supply-side challenges, such as skills mismatches and low rates of absorption by firms of unemployed people, dominate debates on the youth employment challenge in Ghana and across sub-Saharan Africa. The policy prescription is often simplified into a call for more jobs for the teeming youth population. Policymakers’ focus on unemployment conceals the pervasive problem of job casualisation, which is gradually taking root in the formal private sector.
Blue Skies emerged and sustained itself by exploiting specific policy provisions and opportunities. However, the trend towards casualisation ten years after the company’s establishment exposes gaps in policies that are intended to create decent and secure jobs. Employment regulations that were designed to protect employees from exploitation also created an incentive for firms such as Blue Skies to avoid awarding permanent or regular contracts to many of its employees. Blue Skies and other private sector businesses have adopted this strategy to cope with internal and external shocks and stresses, and even to manage normal fluctuations in their business cycles. This has resulted in the burden of flexible employment being transferred onto workers, including large numbers of youth. This problem may also occur in countries where no strict laws limit casualisation of employment.
My analysis of employment casualisation within Blue Skies has a number of implications for policymakers and other stakeholders. Firstly, the Government of Ghana should consider the creation of incentives that would reward companies for employing a proportion (such as 50 per cent) of their workers at all levels, including youths and women, on permanent contracts. Secondly, the government should support horticultural production in the country, in order to ensure that companies like Blue Skies can continue production and processing, which would lead to sustained employment for youths. Thirdly, vulnerability to shocks in key export markets could be reduced if export-oriented businesses expand into regional and larger Africa-wide markets. The African Union’s Continental Free Trade Area (CFTA) and Action Plan on Boosting Intra-African Trade (BIAT) provide opportunities for Ghanaian producers and exporters to increase horticultural production and diversify their export markets, with the potential to create sustainable jobs for youth along the value chain.
2 Age-based definitions of youth, such as the ones used by the United Nations Department of Economic and Social Affairs (UN DESA) (2015) and the African Union Commission (AUC 2006), define youth as people between 15 and 35 years of age. Contextual definitions recognise that youth issues transcend age, such as the one used by Honwana (2012) who sees youth as ‘people-in-waiting’ or transiting to socioeconomic independence.
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© 2018 The Author. IDS Bulletin © Institute of Development Studies | DOI: 10.19088/1968-2018.172
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The IDS Bulletin is published by Institute of Development Studies, Library Road, Brighton BN1 9RE, UK. This article is part of IDS Bulletin Vol. 49 No. 5 November 2018 ‘Youth Employment and the Private Sector in Africa’; the Introduction is also recommended reading.