As oil begins to pump, in his editorial to our Investing in Ghana report, The Africa Report's editor-in-chief Patrick Smith says there are reasons to be optimistic that Ghana can capitalise on the new opportunity.
It is one of those great points in history for Ghana when different developments come together to bring far-reaching and positive change. The ingredients are disparate but if skilfully combined, could produce the self-sustaining development that could transform millions of lives and reassert Ghana’s role as a pathfinder in the region.?
The first ingredient announced this month – Ghana’s ascent to middle-income status – has been two decades in the making. Government statisticians in Accra, with the IMF’s technical input, have recalibrated national income to include the massive growth in telecommunications and financial services since 1991.?
They conclude that Ghana’s output is more than 60% higher than previously calculated, which would mean this year’s gross domestic product, at the forecast annual growth rate of 6.1%, should be some $27bn. That means income per head would be around $1,300 and the budget deficit would be much lower as a percentage of GDP. But tax revenues as a percentage of GDP would also be sharply lower and borrowing costs will rise as Ghana will no longer qualify for much concessional finance from the World Bank and other international institutions.?
Just as Ghana graduates to middle-income status, the taps for commercial oil and gas production are due to be turned on. The domestic use of oil to offset the crippling costs of imports, combined with a local gas distribution network to run power stations and provide cooking gas, will hugely boost national energy production.?
Five years of debate in parliament, civil society and the world of business over how to manage oil and gas revenues has produced a consensus that accountability is critical to success, but opinions are divided on how much should accrue to a heritage fund and how much should be spent on infrastructure, education and health.?
Asia’s growing economic weight, both as a market for Ghana’s energy, industrial and agricultural exports and as a source of finance and new technology, provides a third ingredient. Plans for an aluminium industry depend critically on China as a market and co-financier. India and Japan are investing in oil production and allied industries and several big agricultural projects. South Korea, despite a controversial housing deal, is looking at innovative ways to speed up use of information and communication technology and smart new systems of off-grid electricity networks.
Fourthly, Ghana’s role as a technical and financial services hub will become more important as it boosts regional air and road links. Increasing numbers of companies are choosing Accra as their West African headquarters. Finally, Ghana’s cocoa production and local processing industry, in tandem with production of tropical fruits and juices, can sustain a fast-growing export trade.?
Some developments are interdependent: managing oil revenues well and keeping exchange rates competitive are critical to the successful export of manufactures and tropical fruits. There are reasons to be optimistic: Ghana’s development into a pluralist political system with a more effectively managed economy suggests it can capitalise on the new opportunities. After some false starts, Ghana can once again seize the time.