By Dr. Bernard L. TETTEH-DUMANYA
As Ghana approaches its December 7, 2024 elections, investors will be keenly examining the manifestoes of the two leading candidates—Mahamudu Bawumia of the New Patriotic Party (NPP) and John Mahama of the National Democratic Congress (NDC)—to evaluate which economic vision is more likely to foster a conducive environment for investment and long-term growth. Ghana is currently navigating a critical phase in its recovery, following a prolonged debt restructuring process under President Akufo-Addo-Bawumia Administration.
The government overhauled US$13billion in international bonds as part of a broader restructuring effort, aiming to reduce debt by US$4.7billion and provide cash flow relief of US$4.4billion during the ongoing IMF programme, which runs until 2026. With the only remaining hurdle being a deal with non-Eurobond commercial creditors, investors are already looking beyond the elections to determine whether the next government will sustain the necessary economic reforms to ensure debt sustainability.
In this context, it is crucial for investors to carefully analyse the economic proposals in both manifestoes to gauge which candidate is more likely to promote stability, restore fiscal health and instil confidence in the country’s economic future.
(a) Debt management and fiscal discipline
- Bawumia’s vision: Bawumia’s economic strategy focuses on fiscal discipline, aiming to stabilise the economy and reduce the public debt burden. His proposal includes capping public spending at 105 percent of the previous year’s tax revenue, implementing a flat-rate tax scheme and transferring 3 percent of GDP worth of public spending into private hands for infrastructure development. By reducing the fiscal deficit, Bawumia aims to lower inflation and create a stable economic environment conducive to investment. He also emphasises modernising the economy through digitalisation and tax reforms, which are intended to increase efficiency and reduce the tax burden on businesses.
- Mahama’s vision: John Mahama’s manifesto takes a more expansive approach to economic management. He plans to increase government spending on critical social sectors such as health, education and infrastructure to stimulate economic growth and create jobs. Mahama has proposed introducing a public debt ceiling of 60-70 percent of GDP to curb over-borrowing and ensure long-term debt sustainability. However, his intention to renegotiate the IMF deal for more financing raises concerns about balancing fiscal discipline with the expansionary policies he advocates.
- Investor perspective: From an investor’s viewpoint, Bawumia’s emphasis on fiscal discipline and reducing the debt burden aligns with the IMF’s objectives for fiscal consolidation, making it appealing for those seeking stability and predictability in the short term. His focus on reducing the fiscal deficit could reassure investors, as fiscal discipline is key to maintaining confidence in Ghana’s economy. On the other hand, Mahama’s proposal for higher social spending and infrastructure development might stimulate growth, particularly in the medium term. His “24-hour economy” policy, though, presents an innovative idea that could boost business activities, especially in the informal sector, even though its feasibility has been questioned ignorantly by President Akufo Addo to the foot soldier in the NPP.,
(b) Economic growth and structural reforms
- Bawumia’s vision: Bawumia’s economic manifesto emphasises modernisation, with a particular focus on digitalisation as a driver for private sector dynamism. He aims to create a more business-friendly environment by reducing the tax burden and simplifying the tax system through a flat-rate tax scheme.
This approach is expected to appeal to investors by providing a more predictable and transparent tax environment. Additionally, Bawumia has set an ambitious growth target of 6 percent per year, which will require substantial private sector investment and structural reforms across key industries, especially in technology and innovation.
- Mahama’s vision:
Mahama, on the other hand, advocates for a government-led approach focused on large-scale infrastructure development. His manifesto highlights energy, transport and housing projects as key areas for economic growth. By increasing government spending in these sectors, Mahama aims to boost job creation and stimulate economic activity. His focus on improving social services like health and education is also designed to promote inclusive growth. While these initiatives could lead to medium-term growth, the reliance on state-driven development raises concerns about the potential crowding out of private sector investment.
- Investor perspective: Bawumia’s market-driven approach, which prioritises private sector growth, would likely attract investors seeking long-term stability and returns. His emphasis on digitalisation and tax reforms suggests a business-friendly environment that could encourage investment. However, investors may question how effectively Bawumia can implement these policies, given past challenges with the introduction of the E-levy, which detracted from the government’s broader digitalisation and social inclusion objectives.
On the other hand, Mahama’s focus on infrastructure development could appeal to investors in sectors such as construction and energy. While the increased government intervention may initially concern private investors, it could also provide an opportunity for growth, particularly in sectors that directly benefit from state spending. Additionally, the expansion of social services could alleviate some of the country’s ongoing socio-economic challenges, making it more attractive for socially conscious investors, and may also provide the needed infrastructure to strive, unlike Bawumia’s digitisation without the corresponding infrastructure expansion.
(c) Debt restructuring and IMF relations
- Bawumia’s vision: Bawumia’s economic manifesto aligns closely with the IMF’s focus on fiscal consolidation and structural reforms. He is likely to prioritise maintaining Ghana’s current IMF programme, which has played a key role in stabilising the economy. His approach is to ensure that Ghana adheres to the IMF’s requirements to restore debt sustainability.
However, analysts may question his commitment, given the high spending in the final months of his administration to the elections after eight years in office, leading some to believe that the proposals may be driven more by the desire to secure votes than by genuine economic strategy. While his approach signals continuity and commitment to the IMF programme, the lack of credibility from his previous leadership could create uncertainty for investors.
- Mahama’s vision: Mahama has expressed his intent to renegotiate the terms of the IMF agreement to secure more financing, which could be a contentious issue. His proposal to cap public debt at 60-70 percent of GDP reflects his commitment to fiscal discipline. While IMF prescriptions have often been criticised for not working in many developing countries, Mahama’s plan to renegotiate the terms could offer some relief, especially considering the burdensome Debt Exchange Programme that investors have endured with little recourse. Investors may find the prospect of a new leader renegotiating terms with the IMF appealing, as it could potentially bring more favourable conditions for Ghana’s economic recovery.
- Investor perspective: Investors may find Bawumia’s approach predictable, but his past failure to meet previous commitments casts doubt on his credibility and creates uncertainty. His role as head of the economic management team under the current administration and abysmal performance on the economy have left many questioning his ability to successfully navigate Ghana’s economic challenges. On the other hand, Mahama’s proposal to renegotiate with the IMF could offer investors a sense of hope, as it may provide a more flexible and potentially favourable environment. If successful, this could improve Ghana’s relationship with the IMF and result in more favourable conditions for both investors and the country.
(d) Commodity sectors: oil, cocoa and agriculture
- Bawumia’s vision: While Bawumia’s manifesto does not provide detailed plans for the oil and cocoa sectors, his focus on fiscal discipline and private sector-driven growth suggests that he would prioritise creating a regulatory environment that attracts foreign investment in these sectors. The private sector would be expected to play a significant role in boosting oil production and improving the efficiency of the cocoa industry. Bawumia’s emphasis on creating a stable environment for business would likely extend to these critical sectors.
- Mahama’s vision: Mahama has pledged to increase local ownership in future oil and mining projects. He has also promised to revitalise the cocoa sector by addressing key issues such as low farmer incomes, illegal mining activities and logistical challenges. His focus on infrastructure development could directly benefit the agriculture sector, particularly cocoa, by improving the supply chain and reducing bottlenecks in the sector.
- Investor perspective: Mahama’s focus on increasing local ownership and infrastructure development could be appealing to investors in the oil and cocoa sectors, particularly those looking for long-term growth opportunities and government partnerships. Mahama’s approach could result in a more streamlined and private-sector-friendly environment, especially for investors interested in local content development and the creation of more efficient processes in the commodities sector. This balance between local participation and foreign investment could foster a more attractive and sustainable investment climate in the long run.
In conclusion, while both candidates offer distinct approaches to Ghana’s economic challenges, Mahama’s policies stand out for their potential to stimulate long-term growth, create jobs and address critical socio-economic issues. His focus on infrastructure development, particularly in energy, transport and housing, offers a clear path toward economic expansion and job creation.
By emphasising local ownership in oil and mining projects and addressing key issues in the cocoa sector, Mahama is positioning Ghana to become more self-reliant and less vulnerable to external shocks. His commitment to fiscal discipline, alongside his proposal to renegotiate the IMF deal for more favourable terms, provides a balanced approach to debt management and ensures that Ghana can secure the financing needed for development without sacrificing long-term sustainability.
Furthermore, Mahama’s broader focus on improving social services, including health and education, speaks to a more inclusive economic vision that seeks to lift the living standards of all Ghanaians. While his policies may involve increased government spending, they are designed to stimulate economic growth and social equity, which can have significant benefits for both the population and investors.
In comparison to Bawumia’s more conservative approach, Mahama’s expansive vision presents a more comprehensive solution to Ghana’s challenges, fostering both immediate relief and sustainable growth. His ability to adapt and negotiate with the IMF, coupled with his focus on infrastructure and local ownership, offers an economic plan that promises to strengthen Ghana’s economic resilience, making it the superior policy for investors seeking stability and long-term returns.
>>>the writer is a seasoned Financial Economist & Consultant with an illustrious career spanning 29 years across academic, corporate and agribusiness sectors. His extensive professional journey includes pivotal roles at esteemed institutions such as UBA Ghana, SIC Financial Services, Empretec Ghana and other international finance groups, reflecting his profound understanding of global finance. Renowned as a pioneer in risk management, compliance and corporate strategy, Dr. Tetteh-Dumanya has made significant contributions to the Ghanaian financial landscape. He has been instrumental in spearheading initiatives in Venture Capital, business/financial reengineering and fundraising, thereby playing a pivotal role in the growth and development of numerous entities. Driven by a fervent dedication to capacity development, Dr. Tetteh-Dumanya has offered consultancy services to a diverse array of local and multinational organisations, notably GIZ, AGRA, SNV, DANIDA, USAID, among others. His expertise in financial and business domains is multi-faceted, showcased through his adept navigation of complex challenges and his commitment to driving sustainable growth in every endeavour. For inquiries, Dr. Tetteh-Dumanya can be reached at: [email protected]
