Beyond Aid Ghana: Is our trade policy good enough to deliver on this encouraging promise?
On May 02, 2019, President Nana Addo Dankwa Akufo-Addo launched the charter and strategy document that will guide our nation in attaining the Ghana Beyond Aid (GBA) agenda.
The overall vision for GBA, according to the president, is to create a nation that would be self-sufficient and prosperous, governed according to the rule of law, respect for human rights and individual liberties as well as the principles of democratic accountability.
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As noted by the president, the desire is to manage the country’s (natural) resources in a manner that will allow the country to finance development programs without recourse to external assistance. These are commendable aspirations. One that any well-meaning Ghanaian who cares about the welfare of our dear country must support.
However, GBA is a commendable vision for the nation to be successful though, it must be supported by a sound trade policy. Considering the persisting problem of increasing (youth) unemployment levels in this country (See figure above), it leads one to raise the questions: is our trade policy sound enough to deliver on the vision of a self-sufficient and independent Ghana?
It is important to state here that this piece does not aim to contest the general strategic fit of the current trade policy, but it offers an additional suggestion on how best government can deliver the GBA Agenda.
My main premise is that although commendable, GBA cannot be achieved without a solid trade and investment policy, championed by the ministry of trade and industry.
To achieve GBA objectives sustainably, we need a robust trade policy full of creativity with a sound framework and a favorable climate for entrepreneurship. We are faced with a world that is constantly changing.
Our local firms are facing competition from around the world. To succeed in such an environment, Ghana needs a trade policy that encourages citizens to take risks and develop their resources and competencies, in profitable innovative areas to meet the growing level of competition brought on the country due to globalization and climate change. All these must be championed by the ministry of trade and industries.
Unfortunately, a thorough assessment of the Ministry of Trades and Industry’s “10-point agenda for industrial transformation” shows that that is not so . The policy of the ministry as it is today is geared toward attracting Foreign Direct Investments (FDI) in Ghana. This is unfortunately not how successful countries come about. As shown in figure 1, even as FDI in Ghana has risen over the last couple of years, youth unemployment has persisted at around 13% over the years.
The way forward: Encourage youth entrepreneurship by absorbing the risk of starting a business
Starting a business is risky. Around the world, more than half of all new businesses fail to experience a second anniversary. This risk increases exponentially in countries like Ghana where market-supporting institutions are relatively weak.
To encourage citizens, particularly the youth to take risk and start-up businesses, the government through the Ministry of Trade and Industry should establish an innovation support fund - state-owned company with the goal of releasing the potential of all districts and regions in the country by contributing to innovation, internationalization, and trade promotion by stimulating and facilitating business startups across the country.
How will this work?
The Ghana innovation support fund will work by supporting entrepreneurs to start up business by providing access to support and absorbing initial risk. It will also support existing companies to develop their competitive advantages and enhance innovation through the provision of access to advisory services, promotional services, and network.
On absorbing the risk, specifically, it means entrepreneurs with good ideas can apply for an unconditional startup grant to conduct market visibility study for their ideas, test prototypes of their products, etc. If the ideas are commercially viable, the entrepreneur can apply for an additional grant in a form of loan to commercialize their ideas.
Has this been tested and proven?
This idea is not new. In Norway and other Scandinavian countries, this is how entrepreneurship is encouraged and sustained. The Norwegian government, for example, invests 24 billion kroner (approx. 30 billion dollars) each year in a form of grants and loans to entrepreneurs and startups. Not surprisingly, Norway is one of the countries in the world with the lowest unemployment and financially secured youth population.
We do not need to look too far to the North of Europe for another successful example. Our dear neighbors, Nigeria started testing out a similar version of this model through the “The YouWiN!” initiative in 2011. A recent study by the World Bank confirms that Nigeria’s experiment is working and it might be the best jobs program ever in Nigeria.
My argument here is that, as a country that spends millions of dollars on the importation of rice and meat each year, our trade and industry policy must encourage domestic entrepreneurship to fill these gaps. Giving away millions of cedis to young entrepreneurs may sound risky, but as the World Bank data shows, this is the best way to create jobs and sustain the economy for countries like ours.
This is a better policy alternative than giving away 5-Year Tax Holidays and exemption from import duties, taxes and levies to foreign investors.
These exemptions are poison pills that defeat the purpose of the government’s vision of mobilizing revenue for other developmental projects. An innovation support scheme for entrepreneurship is the antidote for the Poison Pill. Let us support local entrepreneurs by absorbing the risk of starting a business through grant incentives to encourage the youth to take business risks.
The writer is a Ph.D. Candidate/Researcher -Institute for Strategy and Entrepreneurship, BI Norwegian Business School
