STABILITY GIVES GHANA AN ECONOMIC LIFT
▶ The country is providing an example for its neighbours, writes Gavin du Venage
It was 61 years ago that Ghana became the first black African nation to gain independence, and today the country is consolidating democracy while building one of the best-performing economies in the world.
“We have reduced taxes, we are bringing down inflation and interest rates and economic growth is increasing from the alarming 3.7 per cent at December 2016 to 7.9 per cent in our first year,” President Nana Akufo-Addo told Parliament last month. “The indications are that it will be even better this year.”
Ghana’s macroeconomic performance improved in 2017 after a difficult 2016. The country’s economy expanded for the fifth successive quarter in September 2017, at a rate almost double that of 2016, according to a World Bank report released on March 5.
The 3rd edition of the Ghana
Economic Update, which focuses on agriculture as the engine of growth and jobs creation, notes that the service sector bounced back and that fiscal consolidation is paying off. The inflation rate is also down to close to 10 per cent.
“The macroeconomic outlook was largely positive based on the 2017 performance. GDP growth for 2017 is estimated to have almost doubled from the 3.7 per cent in 2016, and is expected to stay at that elevated level through 2018,” said Henry Kerali, World Bank country director for Ghana.
This month, Ghanaians celebrated the independence milestone while taking stock of what has been achieved and how much still needs to be done to turn the vibrant nation of 28 million people into a fully modern state.
Like many other newly independent countries, Ghana had a troubled start, enduring civil conflict, coups and dictatorship. But the past 25 years have been spent under a democratic constitution that last year voted in Mr Akufo-Addo, its fourth elected president.
In his February speech to parliament, Mr Akufo-Addo, 73, delivered a buoyant state-of-the-nation speech in which he declared the country’s economy had shaken off the downturn brought about by falling commodity prices, dragging gold production and slower-than-expected offshore gas production.
Among many things the country has going for it, Ghana has abundant natural resources including gold, cocoa, oil and gas. This month, the Fraser Institute, a Toronto research organisation, named Ghana as Africa’s most desirable mining destination thanks to a combination of welcoming laws and good infrastructure.
This is a positive turn following Ghana’s fall from grace among large mining companies in recent years.
A sharp drop in the gold price, and ongoing trouble with illegal miners who would invade concessions, resulted in operations being cut back or shut down altogether.
Relaxed mining laws and a pledge by government to protect mining rights have led to a change of heart among resource firms. Also this month, AngloGold Ashanti, the world’s third-largest gold mining company by production, said it would spend $500 million to reopen its Obuasi mine. The operation was shut in 2014, costing 5,000 people their jobs. Mining companies are drawn as much by legal frameworks as they are by fundamentals such as commodity prices, says Kenneth Green, senior director of energy and natural resource studies at Fraser.
“Capital is fluid, and one jurisdiction’s loss can be another’s gain because mining investors will flock to jurisdictions that have attractive policies,” he says.
Gold reserves have been discovered elsewhere in Africa, but Ghana’s mining friendly laws make it especially appealing.
“Rich mineral reserves, competitive taxes, efficient permitting procedures and certainty around environmental regulations will still attract significant investment – even with slumping commodity prices,” Mr Green says.
Ghana is now Africa’s second-largest gold producer behind only South Africa, and excavates 4m ounces a year. Meanwhile, mineral explorers are finding new deposits of gold as well as other precious commodities such as diamonds.
Oil and gas production is also increasing after years of false starts.
The Oxford Business Group says that output doubled between mid2016 to the following year. National earnings went from $94m to $200m, driven largely by increases in production levels.
With three new oilfields coming online in the past couple of years, the country produces around 123,000 barrels per day. Eventually, it aims to produce around 240,000 bpd.
Ghana is also in a commanding position with cocoa, being the second-largest producer of the essential ingredient to chocolate in the world after its neighbour, the Ivory Coast.
The country sells around $2 billion worth of cocoa annually, government figures show.
But the World Bank report adds a note of caution. “The country’s heavy reliance on primary commodities, including cocoa, gold, and oil – all prone to volatility in international commodity prices – creates uncertainty about its actual future paths for growth, inflation, export receipts and domestic revenue,” said Michael Geiger, senior economist and co-author of the report.
The report highlights that with the right reforms, agriculture has the potential to be one of the leading sectors for a more diverse economy and can be transformed to be an engine of growth and job creation.
Agriculture has a very large multiplier effect on employment, creating over 750 jobs for every additional $1m of output. But as the importance of the extractive sector has risen, it appears agriculture sector growth has slowed.
“There is a need to channel public resources into research to increase the use of technology, invest in irrigation infrastructure to increase productivity and mitigate the potential adverse effects of climate change, and leverage increased private sector investment in agriculture,” said Hardwick Tchale, senior agricultural economist and co-author.
Despite potential stumbling blocks, optimism is high in Ghana, with shopping malls popping up in the capital Accra and US fast-food company Burger King set to open its first outlet in the country soon.
Other investors are also taking note. “Good news!” exclaimed German ambassador to Ghana Christoph Retzlaff via Twitter. “German Hapag-Lloyd, a global logistics and transport player, opening office in Ghana as hub for West Africa. Third German global player after ThyssenKrupp and Kuehne&Nagel to come to Ghana in last 12 months!”
The president hopes to put this expanding economic activity to good use. A theme of his term is to free Ghana from foreign aid. Much of the country’s budget is shaped by
One jurisdiction’s loss can be another’s gain, because mining investors will flock to [those with] attractive policies
KENNETH GREEN
Senior director, Fraser Institute
decisions made in Brussels, London and New York, and he wants this to change. In a widely reported speech, Mr Akufo-Addo said at an embassy function last year that “it is not right for a country like Ghana 60 years after independence to have its health and education budgets financed by the generosity and charity of European taxpayers”.
Foreign donors add about $1.8bn to the country’s coffers each year, government figures show.
This year the treasury budget will be for a total of just under $14bn, including foreign aid. Total GDP is around $45bn, making Ghana the seventh-biggest economy in sub-Saharan Africa.
Located as it is in a region known for instability, Ghana is demonstrating that with sound governance, progress is possible.
“The very first African country to decolonise, and it inspired our grandparents to fight harder and obtain their independence, too,” says Farida Nabourema, a human rights lawyer in neighbouring Togo.
Ghana’s stability and progress is showing up some of the region’s less salubrious regimes.
“[In some places] we went from generational leaders to generational looters,” Ms Nabourema says.
“Some left legacies and others are leaving liabilities.”