Economic complexities, job creation challenges
Ghana is the only country in Sub-Saharan Africa, which recorded impressive economic growth in the 2000s, without leveraging industrialisation.
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Ghana’s economic growth has since been associated with a thriving services sector, instead of a vibrant manufacturing sector.
This model of economic growth departs radically from the development pathways followed by many developing countries in Asia and Latin America.
Ghana’s sustainable economic growth is attributed to a buoyant non-manufacturing sector engaged in the provision of durable and non-durable services. This unique trajectory of economic growth sits pretty with everyone until critically examined.
Due to inefficient economic management of our natural resources and foreign-exchange earners, there is an increasing dependency of the Ghanaian economy on resource-based exports.
Petroleum is the latest commodity to join the list of natural resources (gold and cocoa) exported annually to generate foreign exchange.
Taken together, these three major commodities account for over 80 per cent of all exports in Ghana.
While exports of commodities, especially petroleum, generate national income, the boom in oil revenues has exposed the vulnerability of the economy to the ebb and flow of globally determined commodity prices.
The Writer
Vulnerabilities
To further heighten our vulnerabilities to global prices, Ghana has not made significant strides in developing related industries of the oil boom, such as petrochemicals, which can contribute to output and also address the challenges posed by the vulnerabilities.
The attempt at diversification of the traditional economy to embrace petrochemicals and other processed commodities has since not yielded any meaningful results.
Ghana continues to trail by growth on the list of countries which discovered oil in the 2000s.
Ghanaians are yet to feel the waves of oil discovery in their income streams.
However, income inequality has widened with oil prosperity.
A more recent study of income inequality in oil-rich countries shows a correlation between rising income inequality and economic growth in Ghana between the periods of 2011 to 2022.
The study finds that income inequality in Ghana is accentuated by geographic differences connected to the regional structure of the economy.
The study reports that over 70 per cent of all revenues are generated by businesses in the Greater Accra Region.
Due to the high rural unemployment rate, income deficits between Accra and the other new regions have increased.
According to national statistics, the unemployment rate has been rising since 2010. From 4.2 per cent in 2010 to 5.8 per cent in 2022.
The sectors behind the economic growth have failed to stem the unemployment rise due to low productivity.
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The industrial or manufacturing sector expected to make amends for the failure of the services/private sector to provide jobs is simultaneously bedevilled by capital-intensive deficits and currency devaluation against the dollar.
Consequently, both services and manufacturing sectors have proved unequal to the task of job creation for university graduates, amidst high population growth in Ghana.
This problem is further compounded by the lack of industrialisation stimulus as a growth motor.
Therefore, low-skilled workers in the public sector and university graduates with semi-skills have not been able to switch to new enterprises created by advances in the IT sector.
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They have found employment in the rather dull informal sector not properly regulated to make meaningful interventions in their livelihoods.
Besides, informality is a pressing challenge for the economy due to tax evasion actors in that sector.
The tax net has not been able to rope in the stakeholders of the informal economy.
Stimulating
Stimulating economic activity and creating jobs in other parts of the country, as a response to this economic complexity, is important to ensure equal opportunity across regions.
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This will help to decrease social tensions between different ethnic groups in Ghana.
This is why inclusive growth has been the top agenda of the government.
The government’s commitment to inclusive growth is demonstrated in key policy documents, such as the Medium-Term National Development Policy Framework and the Ministry of Trade and Industry’s Industrial Transformation Agenda.
The writer is a Lecturer, Economics Department, GIMPA Business School.