Exactly 65 years ago, Ghana was liberated from the shackles of colonialism to become the first African nation to achieve independence. Indeed it was a joyous and happy moment with hopes that the country will pioneer its way towards rapid growth and development for Africa as a continent.
Ghana’s economy is among the three largest economies in West Africa and one of the continent’s most recognized democracies with a history of free elections and changes in government amidst the two focal parties.
The early decades of Ghana’s economic growth
The role of the government prior to gaining independence was limited to primarily the provision of basic amenities such as water, electricity, roads, and postal services. The economic sector like commerce, banking, industries and agriculture were handed by private entities predominantly, with foreigners owning the larger share but agriculture.
The government, just after independence, was on a mission to spread its control over the country’s economic affairs by instituting a huge number of state-owned enterprises chiefly in industries and agriculture. Measures were adopted to attract foreign venture capitalists to operate in partnership with the government to solve the local capital and entrepreneurial skills scarcity.
Indeed, Ghana experienced high economic growth with conditions improving significantly during the 1960s. During this era, the country held foreign reserves similar to those of some Asian countries like Malaysia and South Korea. Ghana was also the world’s leading producer of Cocoa (one-third of the world’s market share). Ghana could afford to lend a helping hand to neighbouring countries during these times.
Ghana’s first president, Dr. Nkrumah, employed policies which would see to the tremendous economic growth of the state. His overthrow in 1966 initiated a series of coup d’états which resulted in the collapse of many of his grand projects in the subsequent years. Some of these projects in the manufacturing sector, counting the fabrics industry, collapsed.
The switches between civilian and military governments resulted in a completely ruined economy in the early 1980s. Prior to the ruin, per capita gross domestic product (GDP) indicated growth but fell by 3.2 percent each year from 1970 to 1981.
Chief of them all was cocoa production which declined by half between the mid-1960s and the late 1970s, extremely dipping Ghana’s stake of the world market from about a third share to an eighth share by the 1983. At the same period, other sectors in the mineral industry dwindled by 32 percent; gold (47percent), diamond (67percent), manganese (43percent), and bauxite (46percent), Tax revenue fell from 17 percent to 5 percent in the space of a decade (1973-1983), and inflation averaged more than 50 percent between 1976 and 1980, striking 116.5 percent in 1981.
The turnover
Ghana’s economic growth rate stabilized from the start of the fourth republic in the early 1990s. The transformation of the late Flight Lt. Jerry Rawlings from a military ruler to an elected civilian president in 1992 start the era of the fourth republic, championing a turnaround for the country’s political fortunes and devastating negative growth of the economy.
GDP grew at 1.9 percent year on average between 1993 and 2005 and achieving 4.5percent per year after 2005, which is significantly above the averages for non-high-income Sub-Saharan African countries (2percent) and for low-income countries (2.6percent). This acceleration was partly due to the revamping of industries, the agricultural sector and higher prices for Ghana’s commodity exports, largely gold and cocoa.
Moving forward
Different factors have been the main drivers of growth in different periods. Before 1970 was labor accumulation, between 1970 and 1990 was human capital accumulation, and total factor productivity (TFP) was the growth driver between 1991 and 2005. Since 2005, fix capital investment became the major driver of growth as investments in the natural resource sector wheeled high.
The stability of economic growth of the country induced a development momentum that allowed for the achievement of a lower middle-income status by the year 2011. This growth placed Ghana in the lead of poverty alleviation in Africa. Ghana attained the first Millennium Development Goal (MDG) of decreasing national poverty rate by more than 50percent, from 1991 (52.7percent) to 2012 (24.2percent). At the same time Ghana sailed through significant structural revolutions and swift urbanization.
The portion of populace living in urban areas sky-rocketed from 36 percent to 55 percent with two and half decades (1990-2016). This was mainly due to shift of labor into services.
The discovery of crude oil and its commercial production in 2011 shot the economic growth higher. The inauguration of the oil production at the Jubilee oil field with the solid performance of gold and cocoa heightened the GDP growth to 15 percent in 2011 and 7.9 percent in 2012. The economy lingers to interest Foreign Direct Investments (FDI), supportedby the prospect of growingoil and gas production.
However can we say this growth is progressive?
Despite being rich in mineral resources and endowed with good education system as well as efficient civil service, Ghana still fell victim to mismanagement and corruption but that has still not prevented it from holding on to its grounds of maintaining hope.
All though Ghana did set itself the target of becoming an upper middle –income country by 2020, requiring an estimated GDP growth rate of about 8 percent annually, however in five years since its inception of the target though the economy has not shown a capacity to move towards the target. Whereas Ghana was expected to grow between 7.1 percent and 8.3 percent in the period of 1996 to 2000, actual growth was 4.2 percent and 5.0 percent.
Why is Ghana unable to meet up to its target?
Although Ghana is experiencing fast economic growth, the country is running a huge fiscal deficit and balance of payments deficit. In spite of growing proceeds from major exports, fiscal deficit soared to 11.5 percent of GDP in 2012 resulting from bigger expenditure on public sector salaries and subsides. The overall fiscal deficit recorded in 2020 had increase by 15.2 percent, public debt increased to almost 80 percent of GDP, enlisting Ghana at a substantial threat of debt distress.
Ghana’s export base is focused on exportation of gold, oil and cocoa, accounting of 75 percent of overall exports. An extended period of low world market prices exerts an adverse consequence on the country’s external and fiscal accounts, and chiefly steady GDP growth.
COVID-19
The rapid growth of the country was also halted by the malicious COVID-19 pandemic, causing a lockdown and a sharp decline in commodity exports. An average of about 7 percent growth was achieved between 2017 and 2019, before the strike of the virus.
The Ghanaian Cedi has been one of Africa’s worst performers in recent times against the major world currencies like the US Dollar, Euro and Pound Sterling. Weakening of the currency and the effect it poses in increasing importation prices has meant that inflation is always on the increase.
The energy sector remains at risk. Cost far outstrips revenues from this sector, costing the budget about 1-2 percent of GDP annually in recent years. Power production and distribution are not even stable or reliable for local businesses, firms and industries to operate.
With all that said, the economy projected to recover gradually over the medium term, acknowledgements to commodity price growth and strong domestic demand. All these would be possible if we stand together to embrace campaigns like the “Buy made in Ghana Goods”, so we can cut down on importation of foreign products. Let’s help also to reduce high spending by the government in some areas such as waste, pollution and disaster managements.
We can make Ghana great again by putting on our patriotism as citizens as well as good governance from leaders.
Now is the time to work more closely together and bounce back better.
“God bless our homeland Ghana, and make our nation great and strong.”
