Posted on Monday, 23 November 2015 10:00

Ghana Country Profile 2015: Setbacks on the road to prosperity

By The Africa Report

altGhana will have an uphill struggle in 2015 as the government tries to stabilise the economy after the rough and tumble of a bad year.

The rapidly depreciating cedi and soaring utility costs have increased the cost of living. As a direct consequence of the daily hardships that Ghanaians face, analysts say that many are losing confidence in President John Dramani Mahama after his two years in office.

The governing National Democratic Congress (NDC) has come in for sharp criticism from civil society groups for overstating its economic ambitions during the latest election campaign of 2012, but at the same time the opposition New Patriotic Party (NPP) has been accused of doing too little to keep the government on its toes after the long-drawn-out dispute over the election results in 2013.

The opposition had been preoccupied with party elections that took place in October 2014, where incumbent leader Nana Akufo-Addo prevailed. The NPP is certain to be more vocal about economic issues in the year ahead. Some NPP activists have already suggested legislation to limit budget deficits.

Restoring confidence

Mahama will have his work cut out trying to convince the electorate that he has a handle both on his party and the economy. An International Monetary Fund (IMF) financial assistance programme which would go some way to restoring confidence among investors, if not with the general public, could be initiated by early 2015.

While former finance minister Kwesi Botchwey was negotiating the terms and conditions of the IMF package, the current minister, Seth Terkper, was on a global roadshow in a bid to attract interest in the country's $1bn eurobond, Ghana's third since 2007.

When the bond was launched in September, it yielded a coupon rate of 8.1%, compared with the much more favourable 5.38% on Côte d'Ivoire's $750m eurobond in July.

An IMF mission in September estimated that real gross domestic product growth would decelerate in 2014 to its lowest level for a decade, with inflation averaging more than 15% over the year.

altThe government expects its tight monetary stance to reduce inflation to about 9.5% in 2015. Elsewhere, the cedi depreciated by about 30% in the first eight months of the year, according to the Bank of Ghana.

The IMF mission said the government had to tighten its fiscal consolidation efforts, reduce the public sector wage bill and scrap subsidies for energy and fuel. After the loss of so much purchasing power in the past year, members of the public are saying such measures are hard to swallow.

Raising bean prices

There has been some revival of confidence in the cocoa sector. The government secured a $1.7bn loan to go towards cocoa purchases for the 2014/2015 season, to boost production and see that industry regulator, Cocobod, pays farmers more for their beans.

Farmers complained about static prices over the past three years, at 3,392 cedi ($1,060) per tonne. The government reacted by raising the price per tonne to 5,520 cedi for the 2014/2015 season, for which production is expected to reach 900,000tn. The government's short-term goal is to push production to 1m tonnes. 

The gold industry is yet to recover from a slump in prices from $1,700 per ounce to close to $1,200 in 2014. The drop saw the temporary closure of Anglogold's Obuasi mine and a large number of job cuts. However gold continues to be the country's foremost export, accounting for 40% of total exports in 2013, with oil at 22% and cocoa at 20.9%.

The completion of the chronically delayed $850m Atuabo gas plant at last seemed to be a possibility by the end of 2014. Once online and at full capacity, the plant will save the country $500m in crude oil imports. The delays meant that oil production at the Jubilee field was limited to 100,000 barrels per day (bpd) against a target of 120,000.

In July 2014, Tullow, the largest stakeholder in the field, began flaring gas to increase production. The delay is said to have cost the company $100m is sales in 2014. The projected value of the government's oil earnings in 2014 was $820m, and there are high hopes for the Tweneboa-Enyenra-Ntomme (TEN) oilfield.

Tullow and its partners plan to invest $2.2bn in Jubilee and TEN in 2015. TEN is set to begin production by 2016. Other fields hold promise, and Lukoil made a new find in the Cape Three Points field in September 2014. The government's goal is to increase production to 500,000bpd within a decade.

In a move to reduce imports, the government launched a 'Made in Ghana' campaign. However, factories that are currently operating are already under-resourced, and no solid plan to boost infrastructure for manufacturing has been put in place.

Expensive and unreliable sources of energy hold the sector back. The president of the Association of Ghana Industries (AGI), James Asare-Adjei, said the industry group has been working with government to develop policies that would deliver more assistance to local manufacturers.

The AGI has also made proposals for technical and financial assistance to boost the capacity of agriculture, agro-processing, aluminium and plastics, so raw materials can be processed and used in Ghana.

Many small and medium-sized enterprises (SMEs) depend on these materials. The AGI plans to set up a bank to enable SMEs to access medium- and long-term loans.

Rolling blackout

After a year of power outages in 2013, Ghana's power supply issues are still unresolved. The country entered another period of load shedding in September 2014 that was set to last until December. The rationing came at a time when the Volta River Authority said the Akosombo Dam had low water levels.

Additionally, irregular gas supply and ongoing maintenance to the Aboadze and Sunon-Asogli thermal plants also contributed to the load shedding. The first phase of the Kpone thermal power project will produce 220MW and is expected to be online in early 2015, with France's EDF to build a second phase to add another 300MW.

altIn July 2014, the government decided to only take half of a contentious $3bn loan from the China Development Bank. The money will go toward the Atuabo gas plant, and several infrastructure projects will now be shelved.

The opposition had long criticised some of the terms of the loan, particularly the commitment fee of 1% per year on unused credit. Development in the north of the country has been hindered by the failings of the Savannah Accelerated Development Authority.

Established to push socio-economic and infrastructure development, the authority has been mismanaged. The government investigated the misappropriation of funds and appointed a slate of new board members in early 2014.

Members of the opposition in the Northern Region have complained that long overdue plans to build rice and shea-nut processing factories have not produced results. Malpractices in the public sector continue to haunt the government as issues of misspent monies have come to the fore. Deals under the Ghana Youth Employment and Entrepreneurial Development Agency and bad 'judgment debt' payments have gone unresolved.

In August 2014 Otumfuo Osei Tutu, the monarch of the Ashanti kingdom, said the country was on a "corruption carousel". In September 2014, Accra was chosen as headquarters for a UN mission working to combat the Ebola crisis across West Africa. By focusing on coordinating logistics, policy and expertise, the mission's goal is to defeat the threat from the virus in the shortest possible time.

Red shirts spotlight governance, corruption and tax hikes

Disaffected workers, teachers, nurses, labourers, bankers and members of civil society have taken to the streets to express their concern about the way the country is being run.

A number of strikes took place in quick succession in mid-2014, attracting thousands of demonstrators.

Mostly middle-class organisers of a campaign calling itself occupy flagstaff House, targeting President John Dramani Mahama's official residence, declared fridays to be 'red fridays'.

Demonstrators donned red clothing and posted pictures of themselves on social media.

Governance analysts say Ghanaians are becoming more vocal in their protests and the discontent is non-partisan.

The common complaints are about rapid increases in prices and austerity measures such as tax hikes and the removal of fuel subsidies.

Protesters say they will adapt to austerity measures if the government tackles corruption.

Non-governmental organisations PenPlusBytes and financial accountability and transparency Africa launched a citizen's budget in august, where spending can be monitored.

They also canvassed for citizen input for the 2015 budget statement. Another project, inform Ghana, is an offshoot of the Ghana decides outreach project that aimed to keep the public updated on voting matters during the 2012 election.

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