Ghana: Will President Akufo-Addo pass the second-term test?

By Jonas Nyabor, Patrick Smith, in Accra
Posted on Wednesday, 7 July 2021 13:50

Ghana's President, Nana Akufo-Addo (C), meets with Spanish Prime Minister, Pedro Sanchez (unseen) at La Moncloa Palace, in Madrid, Spain, 29 March 2021. EFE/ Zipi//

Having scraped through with 51.3% of the vote in the 2020 presidential election, Ghana's Nana Akufo-Addo faces a hung parliament, falling export revenues and mounting debt as he tries to push through his cherished policies.

Striding across the political scene for four decades, Nana Akufo-Addo was once seen as a rebel – a Nkrumaist at university and an anti-corruption and pro-democracy activist in the era of Jerry Rawlings and the Provisional National Defence Council. Now he has emerged as an ideal-type pragmatist with two presidential election victories under his belt.

The enthusiasm for leftism and Nkrumaism are long gone. Akufo-Addo’s father, Edward, was one of Ghana’s founding fathers and followed Kwame Nkrumah as president. Today, his son embodies the Danquah-Busia tradition on the right of Ghana’s spectrum. Akufo-Addo and Rawlings reconciled comprehensively, long before the latter’s sudden illness and death last year.

Rawlings, despite founding the National Democratic Congress (NDC), which is now in opposition, became one of Akufo-Addo’s strongest supporters. This was based more on personal chemistry than ideology and was reinforced by Rawlings’s falling out with John Mahama, the NDC’s unsuccessful presidential candidate in the 2016 and 2020 elections.

It has worked out politically. Akufo-Addo has been consistently more popular than his party – the New Patriotic Party (NPP), often criticised as elitist and detached from popular concerns. That has spared him the flak for some of the NPP government’s most unpopular moves: such as its botched attempt to privatise part of the state electricity company, or the plan to float a gold royalties company, Agyapa, in London and Jersey.

When the Agyapa plan hit a wave of hostility from civil society, the opposition NDC and the government’s own special prosecutor, it was Akufo-Addo who brokered a compromise, announcing that the plan to float the company would be deferred until after last December’s presidential elections.

That election changed Akufo-Addo’s political fortunes. He won the presidency against the NDC’s Mahama but with an official 51.3% of the vote – a much slimmer margin than his landslide in 2016.

A bigger problem for him is that the NPP and the NDC tied for control of parliament. The NDC gained 31 new seats and the NPP lost 32. Each party has 137 seats in the 275-seat parliament. The balance of power is with an independent member of parliament.

A self-described “man in a hurry”, Akufo-Addo has to keep 100% loyalty in the NPP caucus and try to win over some votes from the opposition benches to push through some of his cherished policies. Without that, there is a danger that his second term could be brought low by a combination of economic downturn, mounting debts and protests by frustrated young people.

A new protest movement

Early this year, a group of young activists formed the ‘Fix Ghana’ coalition, a group that resembles the Red Friday movement that marched against corruption and unemployment under Mahama’s government in 2014 and 2015.

Mobilising trade unionists, students and civic activists, Red Friday contributed to the defeat of Mahama in the 2016 elections. That might explain the panicked reaction by the NPP government to the ‘Fix Ghana’ crowds.

Ministers have alternately summoned the movement’s leaders to meetings to hear their grievances and banned their marches. ‘Fix Ghana’ lambasts both parties for failing to create jobs or enough technical training as patronage and corruption flourish.

A ‘man in a hurry’, Akufo-Addo needs opposition votes for his policies

The hung parliament could hobble Akufo-Addo’s second term and empower the NDC. With skilful organisation, the opposition could block big government contracts, ministerial appointments and plans for more borrowing.

It was clear on 6 January, the night of the new parliament’s inauguration, that there would be a challenge to Akufo-Addo’s choice of speaker. His preferred candidate, Aaron Mike Oquaye, lost the vote to the opposition’s choice, Alban Bagbin, in a heated contest. Tempers flared and the police were called into the chamber. It was an inauspicious start for the NPP, showing it to be outmanoeuvred by its opponents.

We can’t say Ghana should not borrow at all. We ought to borrow, but rather we need to borrow responsibly and we ought not to increase the debt-to-GDP ratio.

A veteran operator, Bagbin will make the most of the powers vested in the speaker, but he insists he will be neither “obstructionist” nor a “rubber stamp”.

He was one of three senior NDC politicians to excoriate Mahama’s presidency, and he has not ruled out a run for the top job ahead of the 2024 elections.

After the clash over the speaker, the next contest was Mahama’s petition to the Supreme Court asserting that Akufo-Addo’s victory was illegitimate. Although Mahama hired an impressive team of lawyers headed by the redoubtable Tsatsu Tsikata, the petition failed after weeks of legal disputation. And the petitioners’ attempts to get the volatile Jean Mensa, chair of the electoral commission, to testify in court were thwarted.

Second-highest fiscal deficit in Africa

Since then, the opposition has picked its battles, harshly questioning some of the NPP’s more dubious ministerial nominations but focusing mostly on claims that the country’s economic hardships are due to bad policies, nepotism and corruption. Its parliamentarians point to the country’s rising debt stock, accusing the government of setting the economy on a dangerous path.

“The NDC was adding an average of ¢1.15bn ($197.8m) to our public debt every month and a total of ¢13bn a year, but President Nana Addo Dankwa Akufo-Addo is adding ¢3bn every month and ¢36bn a year,” said the NDC’s deputy spokesman on finance, Isaac Adongo. “Quite clearly, the numbers are showing a very scary picture.”

Debt vs GDP growth

The IMF reckons Ghana’s fiscal deficit hit 16% of GDP last year, the second-highest in Africa. The deficit will stay high, at least double the 5% level prescribed in the IMF’s Fiscal Responsibility Act. Part of this is due to the government’s ¢113.7bn spending plan and a shortfall of revenue this year. This means Ghana’s external and domestic debt will rise further, after reaching 76% of GDP last year, up from 62% in 2019.

Education – oil = debt

Ghana’s debt level is of concern but not heading for a crisis if managed carefully, according to Professor Peter Quartey, director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana.

“We can’t say Ghana should not borrow at all. We ought to borrow, but rather we need to borrow responsibly and we ought not to increase the debt-to-GDP ratio,” he tells The Africa Report.

Quartey adds that the government must step up its digitalisation programmes to boost domestic revenue and find non-tax revenue sources such as dividends from profitable state-owned enterprises.

Free senior high school has been one of Akufo-Addo’s most popular policies.

Financing a free secondary education programme mainly from Ghana’s oil revenue, the Akufo-Addo government has ensured a year-on-year increase in senior high school enrolment since 2017. That has proved to be Akufo-Addo’s most popular initiative but also one of the toughest to deliver. School enrolment has increased by 69% since 2017, but the treasury’s coffers have not kept pace.

“The greatest challenge of the government will be how to continue with the Free SHS programme in respect of the increasing enrolment,” says Kofi Asare, the executive director for Accra-based Africa Education Watch. “In 2017, it had 900,000 students; now it is 1.3 million. In the first year [2017] it was about ¢400m; last year it cost ¢2.4bn.”

Oil revenue, meanwhile, is shrinking under the current unfavourable market conditions. As the world shifts to green energy, Ghana’s oil earnings will come under more pressure, with or without more pandemics.

Nana Amoasi VII, executive director for the Institute for Energy Security, argues that the state-owned Ghana National Petroleum Corporation (GNPC) should find ways to raise output.

“Ghana cannot control the international price of oil but it can control domestic production volumes. In the past three years, we’ve seen stagnation in terms of production,” he says.

Denis Gyeyir, a programme officer at the Natural Resource Governance Institute in Accra, concurs: “If the government fails to invest in exploration, it is going to have production either stagnant or declining.”

Planting crops and building plants

Economic planners in Accra have other options in what is one of West Africa’s more balanced economies: oil is a recent addition to the traditional exports of cocoa and gold. But all of these, exported without significant processing, fail to meet Akufo-Addo’s test of local value-added. The government has been working with Côte d’Ivoire to push up cocoa prices, as the two countries produce more than two-thirds of world production, and to coordinate on local processing.

The Ghanaian government has also been investing in a wider range of crops, focusing on six tree crops as part of its agro-industrial strategy. This is part of its efforts to deliver on its 2016 pledge of one factory in each of Ghana’s 260 districts.

Untangling power contracts has tested the government’s ingenuity

Akufo-Addo has been touting the establishment of a Volkswagen assembly plant in Accra as a sign of the country’s conducive business environment. Toyota and Nissan have also signed agreements to build factories in Ghana.

Trade and industry minister Alan Kyerematen is an international trade expert with an eye on running for the presidency in 2024. Making the industrialisation policy work would greatly help that campaign, but it would need funds and some national coordination. Factories have to be planned where they have easy access to local natural resources as well as a clear route to the domestic and export markets.

The government wants to capitalise on the opportunities for tariff-free commerce opened up by the African Continental Free Trade Area, which has its secretariat in Accra. As in most African states, there is no shortage of dynamic and innovative young entrepreneurs in Ghana.

Ghana, however, falls short on infrastructure, particularly road and rail networks and electricity. When the dumsor (‘on-off’) crisis hit the country in 2013-2016, it was Mahama’s government that brought in a raft of power suppliers, racking up billions of dollars of debt.

Untangling those commitments and working out how much power Ghana can generate on a commercial basis has tested the Akufo-Addo government’s ingenuity. And, like its predecessors, it has let a cluster of heavily overpriced procurement contracts continue to drain money from the treasury.

Meeting those three ambitions – sustaining secondary education, stable electric power and industrialisation – is a self-imposed target for Akufo-Addo. That was long before he had to contend with a pandemic, a weakening oil market and spiralling debt obligations. To pass the finish line much has to be done in the next three years.

This article was first published in The Africa Report’s print magazine.

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