One view that pervades all rigorous analysis of the Ghanaian economy is the need to transform the structure of the economy for growth to benefit more people.
Anyone who has studied Ghana’s economy over the past half century would come to one conclusion; the dependence on export of raw materials has to radically change to spur transformational growth. Exploiting and exporting gold, cocoa, manganese and diamonds have not significantly altered our economic structure, and neither will oil, if all we do is sell it raw and buy the finished product at a higher price.
The economic transformation imperative
According to the Africa Centre for Economic Transformation, (ACET) “Economic transformation will come through diversifying our economy, boosting our competitiveness in world markets, increasing our share of manufacturing in GDP and using more sophisticated technology in production.
In the past few weeks, our country’s leaders have been to Washington to initiate conversations with the IMF on an economic programme and sign the much-lauded MCA Compact 2.
To ensure that growth is sustainable and continues to improve lives of many, countries now need to vigorously promote economic transformation. Ghana’s Economic transformation agenda is therefore no longer an option, it’s an absolute imperative. We have to diversify our production and exports and become more competitive in international markets.
Impact over activity
In his speech at the signing ceremony on Tuesday, August 5, 2014, the President stated the achievements and successes of the first $547 million Compact. Activities and outcomes in themselves, no matter how good, do not translate into measureable sustainable impact if these projects are not integrated into a larger plan for sustainable agribusiness.
We should be concerned about the effects the projects have had on the ultimate vision of strengthening the growth of the sector to lift more people out of poverty. The sad reality is that the growth of the sector fell from 7.2 per cent in 2009 to 5.3 per cent in 2010 and further declined to 0.8 per cent in 2011, 1.3 per cent in 2012 and 3.4 per cent in 2013.
These numbers in themselves may not mean much, but one cannot help but ask how whether at the very least we shouldn’t have maintained pre-MCA levels of growth in the sector? We ought to have a plan to consolidate the gains made from laudable projects such as the $547 million MCA and link the improved infrastructure and access to credit to measurably sustainable impact in agriculture.
We should also be asking our leaders to point out the real and sustainable impacts of these well-executed projects and initiating activities to consolidate the gains. Which begs the question; how transformational will this new compact be?
MCA-2 and power sector transformation
The MCA 2 is a sensible idea aimed at restoring the financial and operational efficiency of our power distributors ECG and NEDCO. But I can bet my last depreciating cedi that merely involving a “credible PSP partner and blocking the leakages in these utilities would not result in the “TRANSFORMATION” of our power sector.
In the power sector, Ghana’s level of generation is a far cry from what it takes to industrialise. Our generation capacity is presently a bit below 3000 MW but the actual load on average is below 1500 mw. Our focus must shift from simply announcing how many new power plants we have built to how much power actually reaches the end user. So far, it has been proved that nations need a reliable power base to industrialise.
The United States produces 3170 watts/capita, Europe 1700, Malaysia 813 and South Africa 900. Ghana’s watts/capita is a tiny 53. This stark comparison means we cannot afford to just list a litany of projects to make the country an industrial one. The MCA-2 must be linked to a broader plan to massively boost our generation capacity, availability and accessibility.
We can exult all we want about how this compact will transform our power sector, but unless its linked to a thoughtful and aggressive overall plan for sector, transformation will remain a pipe dream.
IMF, Necessary but insufficient for economic transformation
Ghana’s decision to engage the IMF for an economic programme has come with mixed reaction. While some say it’s an admission of failed economic policies and mismanagement, others say it will serve as the stabilising bedrock needed for economic takeoff.
The IMF prescriptions are sure to include plans to focus on fiscal discipline in the form of smaller budget deficits, fewer subsidies, tax reform, liberalised financial systems, competitive exchange rates, private sector participation, deregulation among others.
These are viewed differently depending on which side of the fence you sit. Skeptics of the IMF and its policies see them as a part of a neo-liberal agenda deliberately crafted to serve the needs of wealthy countries at the expense of the poor.
They argue for instance that curbs on subsidies and increases in taxes directly worsen the plight of the poor, while privatisation, financial liberalisation and industrial deregulation work to the same effect by delivering windfall profits to domestic and foreign speculators by stripping the state of its assets and weakening rules that protect consumers and workers from abuse.
Others,however, see their policies as necessary bitter pills to be swallowed to put poorly managed economies back on track and argue that the times that Ghana’s books have looked good have coincided with completion of IMF programmes.
Whatever your views are on the IMF, what is clear is that their policy prescriptions may be necessary but insufficient conditions for economic transformation. Many East Asian countries discovered to their chagrin that the kinds of transformation they needed, would not come from the IMF, while Argentina, a long-term darling of the Washington development establishment, is still not out of its economic woods (pun unintended).
This situation suggests that Ghana should approach the IMF with great caution and a broader plan.
Way forward
One can already see the uncanny similarities between some of the conditions in the 2nd Compact and what we know to be the typical policy prescriptions of the IMF, the contentious PSP-partner for ECG/NEDCO requirement being a good example.
We must prepare for the changes that are sure to come from the power sector reforms and create space for competent local participation in areas such as distribution franchises, sub-station infrastructure, metering and revenue collection, prepayment systems among others.
The twin "reprieves" of IMF programme and MCA may be welcome reliefs for this country, but without a well-coordinated plan to diversify our economy, empower our local private sector to drive the development agenda, improve the use of technology in production and reduce corruption to a manageable minimum; our quest to transform Ghana will remain a pipe dream.GB
The author is the host of the award winning CITI FM Breakfast Show.