Sweep­ing to power in Jan­uary 2017, Pres­i­dent Nana Akufo-addo’s gov­ern­ment was rid­ing high on hopes for eco­nomic change and so­cial progress. Al­most two years later, the eu­pho­ria is over as his plans are weighed down by a creaky bu­reau­cracy, par­ti­san point-

The Africa Report - - CONTENTS - By Nana Yaa Men­sah in Ac­cra

Hope hits re­al­ity Akufo-addo’s plans are weighed down by bu­reau­cracy, par­ti­san point-scor­ing and sums that don’t add up

Promis­ing free sec­ondary ed­u­ca­tion, a re­formed na­tional health in­sur­ance scheme and a new fac­tory in ev­ery one of the coun­try’s then 216 dis­tricts, Pres­i­dent Nana Akufo-addo’s gov­ern­ment was court­ing a cri­sis of ex­pec­ta­tions from the start. It had in­her­ited a slow-grow­ing and debt-rid­den econ­omy from the gov­ern­ment of John Ma­hama. More than that, dis­so­nant voices within Akufo-addo’s own New Pa­tri­otic Party (NPP) saw its thump­ing par­lia­men­tary ma­jor­ity as a chance to push for their own in­ter­ests.

Busi­ness wanted lower taxes – an end to the so-called nui­sance taxes – while the pub­lic-sec­tor trade unions wanted guar­an­tees over jobs in the civil ser­vice and the dys­func­tional state-owned en­ter­prises. Even with an im­pres­sive turn­around – Ghana’s econ­omy grew by 8.5% in 2017, more than dou­ble the level of the pre­vi­ous year – the gov­ern­ment is far from de­liv­er­ing the wider trans­for­ma­tion it promised. While pol­icy ad­vis­ers are try­ing to get the re­forms through the sys­tem, a much big­ger mat­ter dom­i­nates the think­ing of party politi­cians: are Ghana­ians bet­ter off than they were two years ago? As the elec­tion in 2020 nears, that mea­sure will out­shine all other is­sues. The NPP’S 2016 man­i­festo of­fered vi­sions of trans­for­ma­tion in ev­ery­thing from fuel prices to cor­rup­tion. A power cri­sis left much of the coun­try sit­ting in the dark be­tween 2014 and 2016 and com­pounded the ef­fects of a 2012/2013 fi­nan­cial squeeze. The NPP said the sit­u­a­tion would be bet­ter un­der an Akufo-addo gov­ern­ment: the econ­omy would be man­aged ef­fec­tively enough to fi­nance high-qual­ity ed­u­ca­tion and health ser­vices.


But NPP sup­port­ers are now among the loud­est crit­ics of the gov­ern­ment. An en­tre­pre­neur from one of the party’s found­ing fam­i­lies who owns a start-up beauty busi­ness in one of Ac­cra’s more af­flu­ent dis­tricts is blunt. “Things have ground to a halt,” she says. “I spoke to­day to one of my sup­pli­ers, and he con­firmed to me what many other peo­ple have been say­ing: there is no money flow­ing through the sys­tem. There’s a gen­eral prob­lem with cash pay­ments from peo­ple who owe me, even those I’ve worked with for six months or longer. Peo­ple who trade are hav­ing prob­lems at the ports.” Cus­toms re­forms at Tema and Sekondi have led to loud com­plaints from the Ghana Union of Traders’ As­so­ci­a­tions, an up­start ri­val to the es­tab­lished As­so­ci­a­tion of Ghana In­dus­tries. And re­forms by the Bank of Ghana have led to forced merg­ers of seven Ghana­ian-owned banks, i ncl ud­ing at l east one con­nected to the for­mer rul­ing Na­tional Demo­cratic Congress (NDC) – uni­bank. More up­heaval is pos­si­ble be­fore the end of the year, when reg­u­la­tory bench­marks for min­i­mum com­mer­cial bank hold­ings of cap­i­tal re­serves rise from 120m ($25m) to 400m (see page 60). In­se­cu­rity has crept into the mar­ket, height­ened by events such as the early-oc­to­ber crash of Men­z­gold. The buc­ca­neer­ing pre­cious-met­als deal­er­ship, led by a twenty-some­thing “creative arts” en­tre­pre­neur called Nana Ap­piah Men­sah, had clashed re­peat­edly with the Se­cu­ri­ties and Ex­change Com­mis­sion, the pre­cious-min­er­als reg­u­la­tory agency and the cen­tral bank. All three claimed Men­z­gold was un­li­censed and had no right to op­er­ate un­der their guide­lines. The com­pany hired the in­ter­na­tional law firm Baker Mckenzie and is­sued a de­fi­ant re­sponse to the bank’s di­rec­tive or­der­ing it to stop trad­ing. The Men­z­gold fi­asco trig­gered a mini-cri­sis, with de­pos­i­tors in cities rush­ing to their lo­cal banks, in­tent on with­draw­ing their money. “The lack of liq­uid­ity stems from a lack of con­fi­dence in the lo­cal banks and Ghana­ian in­sti­tu­tions,” says the beauty-shop owner, who has laid off half her staff in the past cou­ple of months. “In the past, even if your busi­ness didn’t make sense, you could find liq­uid­ity to

plug the gap. Now peo­ple are sit­ting on their cash or mov­ing out of the coun­try.” She lam­basts the Bank of Ghana: “The re­forms should have been done qui­etly and in a way that does not cause panic. […] The ben­e­fi­cia­ries of this cri­sis are the for­eign banks, which do noth­ing to prop up lo­cally owned busi­nesses. There’s ac­tu­ally a run on the banks but ev­ery­one wants to save their busi­ness so they don’t call a spade a spade.” The state-owned GCB Bank has eas­ily met the new cap­i­tal re­quire­ments. Manag­ing di­rec­tor Ray Sowah de­fends the cen­tral bank’s ac­tions: “This en­vi­ron­ment does not want to ac­cept that busi­ness was be­ing done in a wrong man­ner. They want to see it as a niche mar­ket. There’s noth­ing like that. If Bank of Ghana does not reg­u­late the mar­ket, we will all have our­selves to blame.”


Sowah ar­gues that peo­ple had al­lowed them­selves to get used to prac­tices that were un­sus­tain­able: “[GCB] de­posits have been go­ing from strength to strength. But con­ser­vatism in terms of fi­nan­cial ar­range­ments is the only sus­tain­able way of do­ing busi­ness.” The econ­o­mist Kwame Pianim, an el­der states­man of the NPP, is crit­i­cal of the gov­ern­ment’s ap­proach to set­ting out its eco­nomic agenda. The gov­ern­ing party has failed to ex­plain to peo­ple how the pre­vi­ous gov­ern­ment did so much dam­age to the econ­omy, says Pianim. “It was an econ­omy with very un­sta­ble macroe­co­nomic fun­da­men­tals. But the Akufo-addo gov­ern­ment did well in sta­bil­is­ing the cedi and im­prov­ing the macroe­con­omy, giv­ing re­newed cer­tainty to in­vestors.” In­fla­tion shrank from 15.4% in De­cem­ber 2016 to 9.6% in April this year. The gov­ern­ment debt edged down from 73% of gross do­mes­tic prod­uct in De­cem­ber 2016 to 69.2% by the end of 2017. How­ever, rat­ings agency Moody’s pre­dicts a re­bound to 72.4% by the end of this year, driven by the cost of clean­ing up the banks, and then a de­cline to 68.9% by the end of 2019. The surge in growth in 2017 was pow­ered largely by oil and min­ing. Ghana is ex­pected again in 2018 to be among the fastest-ex­pand­ing economies in the world – a re­turn to form af­ter a record-break­ing 14% in 2011 as com­mer­cial oil pro­duc­tion be­gan un­der the then pres­i­dent John Atta Mills of the NDC. “We also in­her­ited strate­gic state en­ter­prises that lacked the bal­ance sheet to be able to do any mean­ing­ful busi­ness,” Pianim says, sin­gling out the case of the peren­ni­ally mis­man­aged en­ergy sec­tor. Boakye Ag­yarko, an ex-wall Street banker who was dis­missed as en­ergy min­is­ter this year af­ter a row in the gov­ern­ment about the rene­go­ti­a­tion of power deals, says the gov­ern­ment is still 2.3bn in ar­rears on its en­ergy sec­tor debts and adds 60m to this debt ev­ery month. This is de­spite its is­su­ing two bonds to clear legacy debt to the Elec­tric­ity Com­pany of Ghana (ECG).


Ac­cord­ing to Pianim, the Akufo-addo gov­ern­ment’s March 2018 cut in the elec­tric­ity tar­iff wors­ened the sit­u­a­tion. “[It] meant that ECG doesn’t col­lect enough money. ECG doesn’t pay Volta River Author­ity (VRA), the power gen­er­a­tor. Then VRA doesn’t pay Ghana Gas, which also meant that at one point the Nige­rian gas dis­trib­u­tor WAPCO (West African Pipeline Com­pany) stopped sup­ply­ing us. If we had re­tained the elec­tric­ity tar­iff where it was, we might have been able to start re­build­ing the bal­ance sheet of these strate­gic sta­te­owned en­ter­prises.” Ghana’s na­tional gas sup­plier is crit­i­cal to plans for de cen­tral is ed in­dus­trial is ation un­der the gov­ern­ment’ s One Dis­trict, One Fac­tory pro­gramme. Ag­yarko says the cab­i­net is not yet com­mit­ted to sav­ing on the state’s en­ergy bill and sug­gests that some close to gov­ern­ment have a vested in­ter­est in the ma­nip­u­la­tion of the price Ghana pays for its in­dus­trial gas. It was those sorts of in­ter­ests that con­trolled the gas prices un­der Ma­hama’s gov­ern­ment, he ar­gues. Akufo-addo’s gov­ern­ment claims that its pre­de­ces­sor signed way too many power pur­chase agree­ments (PPAS), and that Ghana now has too much sup­ply that it can­not use. The Ac­cra gov­ern­ment now wants to rene­go­ti­ate and can­cel some of those deals. If it is suc­cess­ful, it stands to make up to $7.2bn in sav­ings on ex­cess-ca­pac­ity charges from PPAS over a 13-to-15-year pe­riod, at an es­ti­mated cost of just $520m, says Ag­yarko.

“Can­celling all li­a­bil­i­ties was agreed in cab­i­net, cleared with the at­tor­ney gen­eral, and it was left to rene­go­ti­a­tion of pay­ment terms with the min­istry of fi­nance,” the for­mer en­ergy min­is­ter says. But this was fol­lowed by foot-drag­ging, he told The Africa Re­port in Septem­ber, when terms were still not agreed. At the Fi­nan­cial Times Africa Sum­mit in Lon­don on 7-8 Oc­to­ber, Pres­i­dent Akufo-addo an­nounced that his gov­ern­ment has ac­cepted rec­om­men­da­tions for a thor­ough re­view of the PPAS and now an­tic­i­pates mak­ing $7.6bn in sav­ings over a 13-year pe­riod. Crit­ics say the gov­ern­ment will not save nearly that much and may have dif­fi­culty can­celling deals.


While the NPP has been crit­i­cal of the deals the NDC agreed, the op­po­si­tion lam­basted a May 2018 tax break worth $259m that the gov­ern­ment agreed with South African firm An­gl­o­gold Ashanti so that it would re­launch op­er­a­tions at the Obuasi mine, which was closed in 2014 due to dis­putes over se­cu­rity and ar­ti­sanal min­ing. As a for­mer chair­man of the Co­coa Mar­ket­ing Board (Co­co­bod), Pianim laments the gov­ern­ment’s timid­ity in ad­dress­ing prob­lems in the co­coa sec­tor. Co­co­bod has an his­tor­i­cal debt of up to $10bn, he says, ac­cu­mu­lated by pay­ing lo­cal pro­ducer prices con­sis­tently above the world price and ex­ac­er­bated by al­leged graft by past Ndc-ap­pointed of­fi­cials. “We used to lose $300 for ev­ery tonne of co­coa we sell. This year, with our agree­ment to set a pro­ducer price in co­op­er­a­tion with Côte d’ivoire, the sit­u­a­tion has im­proved – we will lose $200 for ev­ery tonne of co­coa.” Grow­ing col­lab­o­ra­tion with the Ivo­rians also in­cludes plans to process up to 50% of co­coa grown lo­cally and en­gage­ment with an African De­vel­op­ment Bank-backed pro­gramme aimed at at­tract­ing young farm­ers into the sec­tor. Akufo-addo’s gov­ern­ment will face heavy pres­sures to boost spend­ing in the run-up to elec­tions in 2020. Its grad­u­a­tion next April from In­ter­na­tional Mon­e­tary Fund su­per­vi­sion may presage a race to open the cof­fers and find treats for dis­il­lu­sioned party sup­port­ers. The Pres­i­dent and his team are try­ing to shift the spend­ing em­pha­sis away from di­rect hand­outs to the faith­ful to gen­eral so­cial ini­tia­tives. The Free Se­nior High School pro­gramme launched last year has given 180,000 dis­ad­van­taged teenagers ac­cess to higher-level ed­u­ca­tion, but also sparked a fierce de­bate about ed­u­ca­tional stan­dards and how the sys­tem can be fi­nanced. Some are call­ing for means-test­ing so that the bet­ter off will be forced to pay fees. On 17 Oc­to­ber, Akufo-addo in­au­gu­rated the Na­tion Builders Corps, send­ing 100,000 un­em­ployed grad­u­ates into a three-year pub­lic ser vice train­ing scheme. With the IMF’S back­ing, the gov­ern­ment im­posed a freeze on public­sec­tor hir­ing in 2015, push­ing up youth un­em­ploy­ment. The Na­tion Builders Corps scheme is one in­terim mea­sure. Al­though such so­cial in­clu­sion pro­grammes may help the NPP’S po­lit­i­cal for­tunes, the core mea­sures of its suc­cess will be the ef­fect on their pock­ets. As Sowah of GCB says: “You have to un­der­stand that we are deal­ing with a pop­u­lace who don’t care about struc­tures. They are in­ter­ested in food on their ta­ble and full bel­lies. So you can make all the noise you want but is it really go­ing to do much? That’s the real is­sue that we have to con­front.”

Pres­i­dent Akufo-addo has not suc­ceeded in ex­plain­ing to the peo­ple why the coun­try was in debt, says one critic

Tax breaks of­fered to An­gl­o­gold Ashanti to restart the Obuasi gold mine proved con­tentious

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