DESPITE being severely tested, Ghana remains one of the stars of “Africa Rising”; the discovery of commercial deposits of oil in 2007 were a feather in the cap of an economic recovery that had begun in the 1980s and accelerated in the 2000s, raising optimism in the country’s capacity to realise its economic potential.
Widely lauded for managing five peaceful and democratic transitions of power since 1992, and buoyed by high commodity prices, Ghana’s economy reached peak growth of 15% in 2011, and it seemed that nothing could stop the country powering into the future.
But in 2014, the outlook started to dim. A sharp dip in global oil prices in the second half of the year exposed fiscal indiscipline; large increases in government spending had led to high inflation and interest rates, a sharp depreciation of the Cedi, and foreign exchange shortages.
Last year, the Ghanaian currency lost 31% of its value. The slide wouldn’t have been so steep if Ghana’s government had been diligent about managing its oil and commodities windfalls during the good times.
But it wasn’t - in 2012, the country already had a budget deficit amounting to 12% of GDP; in 2014 it was hardly any better, at 9.2% of GDP; in April, the country approached the International Monetary Fund for help, receiving a $918 million package of loans designed to get the country back on track.
Still, there is much to be optimistic about in Ghana, and if the government arrested the decline, it can indisputably reclaim its position as one of the best investment opportunities in Africa.
Ghana has a big need for investment in power infrastructure - the country has been recently been hit by punishing rolling blackouts. The IMF’s aid package might fix this, as it requires a cessation of energy subsidies, as a way to free utilities from the burden of charging below-market rates mandated by the government.
The greater revenue and profits should encourage investment in power generation and transmission capacity.
The sectoral distribution of Ghana’s GDP estimated for 2013 are services (50.6%), industry (28.1%) and agriculture (21.3%). However, in terms of workforce, the agricultural sector employs more than half of the workforce (56%), being mainly small landholders. The services sector employs 29% of the total labour force while industry absorbs 15%.
Most of the Ghana’s comparative advantage in export products is strongest in cocoa and gold, and fairly strong in seeds and fruits, wood products, palm products, aluminum products, fish, crustaceans, mollusks and tourism.
Cape Coast castle in Ghana, from where thousands of slaves were shipped to the Americas between the 15th and 19th centuries. (Photo/Flickr/ Hiroo Yamagata).
It is the world’s second-largest exporter of cocoa, behind Côte d’Ivoire. Cocoa offers opportunities to increase export earnings by improving yields and moving up the value chain into intermediate processing, says a recent report by the African Centre for Economic Transformation.
But Ghana should first resolve whether to continue to export its raw cocoa beans or encourage domestic processing of its beans.
Other opportunities are in light manufacturing of wood, palm oil, and aluminum products. Both palm oil and wood have the potential for backward linkages and strong value addition prospects for regional and global markets.
Ghana’s horticultural exports, led by pineapples, yams, and bananas, can extend to mangoes, citrus fruits, melons, and avocados; emerging aquaculture could drive exports of fresh and frozen fish. Increased domestic production of rice, sugar, meat, and poultry is another food processing segment with potential for the domestic and regional markets.
In addition, tourism and business travel can be further leveraged with better infrastructure and support services. The country hosted over 1 million visitors in 2013, recording a 12% increase in inbound arrivals during the year. Ghana’s tourist attractions centre on its history, particularly the centuries-old slave forts at the Coast, as well as the cultural attractions and wildlife.