The economic ‘witches dance’
The country has experimented and tried different models of economic development with varying results post-independence. The first decade after independence saw the country embark on grandeur projects that were meant to serve as the socio-economic foundation on which the future prosperous Ghana was to be built.
Notable investments in the agricultural sector included: construction of silos to store excess food, establishment of many plantations, and the setting up of animal farms. There was heavy investment in sea ports – Tema and Takoradi – and aerodromes; construction of a dual-carriage highway between the then less-populated industrial city of Tema and Accra; and construction of railway lines from major mineral-rich areas to the port of Takoradi to facilitate exports of gold, diamond, timber and other resources.
Indeed, a few years after independence, the country’s Gross Domestic Product (GDP) per capita, according to varied scholars, increased by about 47 percent – from US$181 to about US$260. This was comparable to the GDP of Asian giants Malaysia and Thailand.
Malaysia as at 1960 had a GDP per capita of US$234, while Thailand could boast a GDP per capita of US$100. Things however changed rapidly, and economic gains made were eroded.
The economic fortunes of Ghana, like the rest of Africa, have shone and faded – leaving that country during the early 1990s in a “state of arrested development, unable to make the ‘leap’ to Africa’s next, as yet uncertain, phase of economic evolution”.
After years of economic gloom, Ghana was ready in 1992 to start a new chapter. The country opened up for private capital and adopted a new constitution to reflect its new thinking. The Bretton Wood institutions – the World Bank and International Monetary Fund (IMF) – were willing supporters of the country’s new quest to develop, as lucrative offers were wrapped in clogging reforms and demands.
The country struggled through the period and recorded some modest political reforms, establishing some very important state institutions that served as the foundation for successive governments.
A study on the Impact of Democratic Political Transition on the Economy of Ghana, by Kwabena Asomanin Anaman notes that: “The 1984 to 2010 period is the longest stretch of continuous growth in Ghana with positive annual growth in each year, with growth ranging from 3.2 percent in 1984 to a high of 8.4 percent”.
In 2000, an election year which saw the incumbent government lose power, annual economic growth was only 3.7 percent. This was caused by external trade and financial shocks, low internal production, and relatively limited room for government overspending.
The 2001 election ushered the country into a new economic era. Heavily indebted and out of options, Ghana signed up to the Heavily Indebted Poor Countries programme to have some debts ‘forgiven’.
The HIPC initiative was designed to provide debt-relief to cash-strapped countries based on the implementation of poverty-alleviation strategies prescribed by the IMF and the World Bank.
President John Agyekum Kufuor in 2001 said: “We did not take the decision to join HIPC as a political trick or gimmick, but as an opportunity to take a breather to pursue medium- to long-term targets”.
Debts were forgiven, a new lease of life in the economy saw the influx of foreign capital into its various sectors. The banking, telecom, media, real estate sectors saw some large investments. Others were the automobile, ICT and agro-processing sectors.
The economy rebounded and GDP grew. Per Capita GDP as at 2000 was US$1,305. This increased to a high of US$1,841 in 2013.
Asomanin Anaman found that: “The opposite growth rate occurred in 2008 when the incumbent government lost power. Economic growth reached about 8.4 percent in 2008, achieved through very high government spending that was made possible by the financial space created through massive foreign debt cancellation in 2006 – involving the forgiveness of two-thirds of Ghana’s external debts.
“Economic growth declined in 2009 due to the reduced real government spending as a means of curtailing government deficits accumulated by the previous government from 2006 to 2008, and an external economic downturn in Ghana’s principal Western development partners. Finally, economic growth rebounded in 2010 based on a 7.7 percent change in real GDP.”
Indeed, we took two steps back in our ‘witches dance’. Per capita GDP reduced from US$1,841 in 2013 to US$1,426 in 2014. It further reduced to US$1,325 in 2015.
Given the mixed results, Anaman (2016) concludes that: “There is a mixed picture of positive and negative effects from the impact of democratic political transition on economic growth”.
In as much as the country is seen as a beacon of democracy in a rough West African neighbourhood, the democratic progression has not reflected in our economic journey thus far.
The march to prosperity?
With the election of a new government in 2016, there has been renewed interest in the country’s economy, with over US$6billion total investments recorded—Foreign Direct Investment constituting some US$4billion in 2017.
The numerous projects rolled out by the current government, including the “Planting for Food and Jobs programme”, “One District, One factory”, and construction of dams in farming villages of northern Ghana, are but a few of the initiatives that have attracted the investment community’s attention.
As many as 191 companies have been identified under the ‘One District, One Factory’ initiative to undertake projects in 102 districts, with the potential of creating 250,000 jobs when implemented.
The regional breakdown of the companies by region are: Ashanti 35, Brong Ahafo 19, Central 21, Eastern 34, Greater Accra 28, Northern 17, Upper East 4, Upper West 5, Western 10, and Volta 18.
Government has emphasised that the ‘One District, One Factory’ programme will be a vehicle to revive the country’s ailing manufacturing sector, and add value to agriculture.
Besides the ‘One District, One Factory’ initiative, the Akufo-Addo government has said it will pursue an aggressive industrialisation agenda that should further create jobs.
Major challenges going forward
Unemployment remain a major issue facing the country. Prof. William Baah-Boateng of the Department of Economics, University of Ghana – Speaking at a recent Ghana Policy Dialogue on job-creation for the youth, organised by the Africa Centre for Economic Transformation (ACET) – noted that: “From the demand side, we realise that the country is not generating sufficient jobs to absorb the rising number of unemployed people into the labour market every year.
“We’ve been growing; we grew at 14% in 2011. Growth came down, but in 2017 growth went up beyond 7%. That means we are picking up again. But you also have to look at the source of growth.”
He explained that investment must be channelled into some key labour-intensive sectors. “We need to look at agriculture, manufacturing and tourism. Research has shown that these are the activities or sectors that have the potential to generate high levels of employment. We need to sit down and plan well.”
The decades-old housing deficit of over 1.5million units is also a major issue that must be tackled. As the number of people living in urban areas grows, it is prudent to fix the housing challenges now.
Densely populated urban areas with inadequate shelter for inhabitants and poor sanitation, are hot-beds for diseases.
As the country marks 61 years of independence, it is time to truly ‘build’ on the good from the past and eschew politically-minded policies. Developmental projects that are citizen-centred must be supported by all. The Black Star must shine brighter than before.