By Samuel Lartey (Prof.)
Ghana’s underground economy and black market have expanded into significant socio-economic systems, facilitated by public officials and corporate executives who intentionally circumvent regulatory requirements and licensing processes for personal gain. These shadow operations not only undermine the formal economy but also impact national growth, public services, and social equity.
This feature article explores how the underground economy benefits its participants, examining how their lavish lifestyles are maintained through manipulation of the system, and the broader economic implications for individuals, businesses, and communities. We will highlight dates, financial data, and examples to illustrate how these practices have entrenched inequality and corruption in Ghana.
The Power of Personal interests over national interests
In recent years, Ghana has seen a growing trend of individuals prioritising personal interests over corporate, public, and national interests, often at the expense of the country’s development.
This self-centeredness is reflected in various sectors, including politics, public service, and business. For instance, according to the 2023 Ghana Integrity Initiative report, corruption costs the nation approximately GHS 13.5 billion annually, as individuals and public officials divert public funds for personal gain. The 2022 Auditor-General’s report also uncovered widespread misappropriation of public resources, with over GHS 5.4 billion in financial irregularities detected across government agencies.
In the political arena, personal ambitions frequently overshadow national priorities. A 2021 Afrobarometer survey revealed that 65% of Ghanaians believe politicians enter public office primarily to benefit themselves, rather than serve the country. This perception has been reinforced by numerous scandals, including the Agyapa Royalties deal in 2020, which raised concerns about transparency and personal profiteering from national resources.
Similarly, in the business sector, cronyism and nepotism have hindered corporate governance. According to the World Bank’s 2021 Doing Business Report, Ghana ranked 118th out of 190 countries, with issues like weak corporate governance and favouritism in business dealings negatively impacting the investment climate.
The private sector’s reluctance to prioritise national economic growth over personal profits has stifled innovation and productivity, contributing to a decline in economic growth from 6.5% in 2019 to 3.4% in 2022, as reported by the Ghana Statistical Service.
These figures highlight how self-centered actions, driven by personal interest, have resulted in lost opportunities for national progress, weakened public trust, and financial losses to the state. This culture of placing personal interests over collective responsibilities continues to erode public confidence and threatens Ghana’s long-term economic stability and social cohesion.
Manipulation of the System: Circumventing Regulations
The underground economy thrives on the deliberate manipulation of Ghana’s regulatory frameworks. Public officials, corporate executives, and private sector actors find ways to bypass established procedures to advance their financial interests, using the black market to evade taxes, licensing requirements, and other legal constraints. This subversion of formal rules is widespread in sectors such as finance, real estate, fuel, procurement, and telecommunications.
- Black Market Foreign Exchange:
The manipulation of foreign exchange is one of the most glaring examples of how the system is bypassed. Despite regulations imposed by the Bank of Ghana, corporate executives often trade foreign currency on the black market to secure better exchange rates and avoid taxes.
By sidestepping formal banking channels, these individuals avoid regulatory scrutiny, boosting personal wealth while contributing to Ghana’s growing foreign exchange crisis. In 2023, the parallel market rate for the U.S. dollar exceeded the official rate by as much as 20%, costing the economy $1.2 billion in lost foreign reserves.
- Procurement Fraud and Contract Inflation:
In the public sector, officials routinely engage in procurement fraud by awarding inflated contracts to companies owned by associates or shell entities. These contracts often exceed the necessary budget, with the surplus pocketed by those who orchestrate the deal.
The Public Procurement Authority (PPA) reported in 2022 that fraudulent practices had inflated public spending by over GH₵5 billion. Public procurement, meant to benefit national development, has instead become a mechanism for enriching a select few, leaving many critical infrastructure projects underfunded or unfinished.
- Fuel Smuggling and Subsidy Misuse:
Public officials and private sector operators in the petroleum industry are frequently involved in smuggling subsidised fuel to neighboring countries. By diverting fuel intended for domestic consumption to the black market, these operators take advantage of higher prices abroad, while domestic consumers face shortages and rising fuel costs.
In 2021, the National Petroleum Authority estimated that Ghana lost approximately GH₵1.2 billion to fuel smuggling, contributing to a nationwide fuel crisis and increasing the financial burden on ordinary Ghanaians.
Showcasing Wealth
The wealth accumulated through these black-market activities and regulatory circumventions is often visible in the extravagant lifestyles of those involved. Public officials and corporate executives engaged in these underground practices use their ill-gotten gains to lead lives far beyond their official earnings. This is evident in their ownership of luxury assets, expensive social engagements, and connections to exclusive business networks.
Luxury Real Estate and High-End Properties:
One of the most noticeable signs of wealth accumulation is the purchase of high-end real estate in affluent areas such as East Legon, Cantonments, and Airport Residential Area in Accra. Public officials, whose salaries alone could not justify such purchases, own multi-million-dollar homes, financed through black market profits or corrupt dealings.
According to the Ghana Real Estate Developers Association (GREDA), purchases of high-end real estate in Accra increased by 22% in 2023, with many of these properties linked to individuals involved in the underground economy. Homes in these areas typically cost between $500,000 and $1 million, a sharp contrast to the modest earnings reported by many public servants.
- Luxury Cars and Extravagant Spending:
High-ranking officials and executives flaunt their wealth through the ownership of luxury vehicles. Brands such as Range Rover, Mercedes-Benz, and Porsche are common sights in the driveways of these individuals.
These vehicles are often imported illegally, bypassing customs duties through connections with corrupt customs officials. In 2022, the Ghana Revenue Authority (GRA) reported that the country lost over GH₵400 million in unpaid duties on imported luxury vehicles, many of which were owned by beneficiaries of the underground economy.
- Elite Social Circles and Networking:
Individuals benefiting from the underground economy often socialize in elite clubs and networks where they establish further business connections to perpetuate their control over key sectors.
These exclusive circles allow for the exchange of insider information and the consolidation of power, ensuring that wealth remains concentrated among a select group of politically connected individuals. Lavish parties, overseas vacations, and extravagant lifestyles are maintained through the proceeds of black market activities and regulatory evasion, all while the general population struggles with inflation and economic stagnation.
Circumventing Regulatory Requirements and Licensing
The ability to live lavishly while accumulating wealth illegally is rooted in the systematic circumvention of regulatory requirements. Public officials and corporate executives exploit legal loopholes and engage in outright fraud to avoid compliance with tax laws, licensing requirements, and industry-specific regulations.
- Tax Evasion and Revenue Underreporting:
Tax evasion is rampant among large corporations, which often underreport their revenues or engage in creative accounting to minimise their tax liabilities. Corporate executives routinely bribe tax officials to overlook discrepancies in financial records, allowing businesses to declare lower profits.
According to the GRA, Ghana lost approximately GH₵5 billion in 2022 due to corporate tax evasion schemes, particularly in sectors such as telecommunications, construction, and oil and gas. Transfer pricing, where companies manipulate the cost of goods and services between subsidiaries to shift profits offshore, remains a significant issue in Ghana’s financial landscape.
- Illegal Mining and Resource Extraction:
In sectors like mining, many companies operate without proper licenses, engaging in illegal mining (galamsey) under the protection of corrupt public officials. These illegal mining operations destroy the environment, pollute water sources, and contribute little to national revenue, while the operators reap significant profits. In 2022, it was estimated that Ghana lost over $3 billion in potential revenue due to illegal mining activities.
Despite government crackdowns, many of these operations continue due to the involvement of influential individuals who manipulate licensing processes or evade detection altogether.
- Customs and Import Duty Fraud:
Customs officers are frequently bribed to allow the importation of goods without the payment of appropriate duties. This practice is particularly common in the importation of luxury goods, including electronics, cars, and fashion items. In 2021, the GRA reported a GH₵600 million loss in potential customs revenue due to under-declaration of goods at the country’s ports.
Corporate executives and importers routinely collude with customs officials to falsify the value of imported items, paying significantly less than they should in duties while still selling goods at market prices, further enriching themselves at the expense of the state.
Impact on the Economy and Society
The proliferation of the underground economy and black market has profound implications for Ghana’s economy and society. These practices distort market operations, exacerbate inequality, and weaken government revenue collection, leaving the broader public to bear the brunt of economic mismanagement.
- Disruption of Formal Businesses:
Formal businesses in Ghana struggle to compete with those operating in the black market. Small and medium-sized enterprises (SMEs) that follow regulatory procedures are often at a disadvantage because they cannot match the low prices of businesses that evade taxes and duties. This results in an uneven playing field, where legitimate businesses are pushed out of the market or forced to operate in the underground economy to survive.
- Growing Inequality;
The wealth gap in Ghana continues to widen due to the entrenched underground economy. According to the World Bank, Ghana’s Ginicoefficient stood at 0.43 in 2023, reflecting a high level of income inequality.
While a small group of people benefits immensely from regulatory evasion and black-market activities, the majority of Ghanaians struggle with rising inflation, high unemployment, and deteriorating public services. The economic strain on ordinary citizens is compounded by the siphoning of public resources into private pockets.
- Erosion of Public Trust:
The deliberate circumvention of regulations by public officials and corporate executives has eroded public trust in government institutions. Citizens see those in power using their positions to amass personal wealth, while public infrastructure and social services suffer from underfunding.
A 2022 Afrobarometer survey revealed that 70% of Ghanaians believe corruption is a major impediment to national development. The perception that the political and corporate elite operate above the law has led to widespread disillusionment with the government’s ability to deliver meaningful reforms.
Impact on Government and Regulatory Systems
The deliberate actions of corporate and public sector actors to bypass regulations and licensing requirements weaken Ghana’s regulatory institutions, making it difficult for the government to enforce laws and collect revenue effectively.
- Weakened Regulatory Bodies:
Agencies such as the Ghana Revenue Authority, the Bank of Ghana, and the Environmental Protection Agency are undermined by internal corruption and external pressures. Regulatory bodies tasked with overseeing compliance are often complicit in the very violations they are supposed to prevent.
For instance, customs officials who are supposed to enforce duties on imported goods frequently accept bribes to allow goods to pass unchecked. This undermines the effectiveness of government regulations and reduces public confidence in the ability of these institutions to act impartially.
- Loss of Tax Revenue:
Tax evasion and black-market activities significantly reduce the government’s ability to generate revenue. The informal sector, which represents more than 50% of Ghana’s GDP, contributes little in taxes due to its underground nature.
According to the Ministry of Finance, Ghana lost over GH₵9 billion in tax revenue in 2022 alone due to tax evasion and black-market transactions. This loss of revenue hampers the government’s ability to invest in essential services such as healthcare, education, and infrastructure, further widening the gap between the elite and the general population.
Conclusion
Ghana’s underground economy and black market are fuelled by public officials and corporate executives who manipulate regulatory systems for personal gain. These practices, visible in the extravagant lifestyles of the beneficiaries, undermine formal businesses, weaken government institutions, and exacerbate inequality in the country. T
o reverse this trend, it is essential to implement stricter enforcement of regulations, increase transparency in public procurement, and hold those who circumvent the system accountable. By addressing these issues, Ghana can create a more equitable and transparent economic system that benefits all citizens, not just the privileged few.
