UNIVERSITE SORBONNE NOUVELLE - PARIS III MASTER PROFESSIONNEL LANGUES ET AFFAIRES ECONOMIQUES INTERNATIONALES M1 – PARCOURS : NCI
GHANA: THE GATEWAY TO WEST-AFRICA?
Mini-mémoire de recherche rédigé par ELYDORA MATUBANZILA dans le cadre de l’UE A8EMR (méthodologie de la recherche) sous la direction de Madame Dalingwater Année 2013-2014
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UNIVERSITE SORBONNE NOUVELLE - PARIS III MASTER PROFESSIONNEL LANGUES ET AFFAIRES ECONOMIQUES INTERNATIONALES M1 – PARCOURS : NCI
GHANA: THE GATEWAY TO WEST-AFRICA?
Mini-mémoire de recherche rédigé par ELYDORA MATUBANZILA dans le cadre de l’UE A8EMR (méthodologie de la recherche) sous la direction de Madame Dalingwater Année 2013-2014
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En application de la décision prise par le Conseil des études et de la vie universitaire de l’Université Sorbonne Nouvelle – Paris III en mars 2007.
DECLARATION SUR L’HONNEUR
Je, soussignée MATUBANZILA Elydora déclare avoir réalisé ce travail sans aide extérieure ni sources autres que celles qui sont citées. Toutes les citations qui sont reprises à la lettre ou dans l’esprit sont signalées comme telles. Ce travail n’a été soumis à aucun autre jury d’examen quel qu’il soit (en France ou à l’étranger), sous une forme identique ou similaire.
Date : 28/04/2014 Signature MATUBANZILA Elydora Coordonnées de l’étudiant signataire : MATUBANZILA Elydora 1 rue Henri Desgrange 75012 Paris Email :
[email protected] Tel : +33 6 22 77 04 16
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Table of Contents Acknowledgments ........................................................................................................................ i Abstract .........................................................................................................................................ii List of Acronyms .........................................................................................................................iii Introduction ................................................................................................................................. 4 I. The determining political and economic legacies Ghana has acquired since independence ............................................................................................................................... 6 I.1
The Legacy of Independence and the attachment to the Commonwealth ............. 6
I.2
The evolution of State governance after the 1960s ................................................... 7
Leadership potential ......................................................................................................... 10
I.
II.1.
Symbolizing stability lays a solid background for leadership .............................. 10
II.2.
High investment attraction capacity doesn’t only count on political stability .... 10
II.3. High presence of competition but the driving sectors are helping the economy maintain its competitiveness................................................................................................. 12 II.
There are still significant challenges on the road to the gateway of West-Africa ... 16
III.1 South-Africa and the Asian countries represent both inspiration and competition ............................................................................................................................ 16 III.2.
Ghana needs to learn how to handle partnerships with foreign countries ..... 17
III.3.
The positive growth of the economy is not extended to the whole population 18
III.4. Democracy, stability and peace are being threatened by corruption and lack of clear crude oil policies ...................................................................................................... 19 Conclusion.................................................................................................................................. 22 Bibliography .............................................................................................................................. 22 Appendix 1 ................................................................................................................................. 25 Appendix 2 ................................................................................................................................. 26 Appendix 3 ................................................................................................................................. 27
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Acknowledgments I would like to express my deep gratitude to Professor Louise Dalingwater, my research supervisor, for her patient guidance, enthusiastic encouragement and useful critiques of this research work. I would also like to extend my thanks to all who allowed me interview them to collect further insight about my research topic. Finally, I wish to thank my family and friends for their support and encouragement throughout my study.
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Abstract Le Ghana est une ancienne colonie Britannique et pays membre du Commonwealth localisé en Afrique de l’ouest. Depuis quelques années et suite à son évolution prometteuse, elle est souvent désignée comme la « porte d’entrée » de l’Afrique de l’ouest, en d’autres termes le pays porteur de l’avenir dans cette région. Ce terme n’est pas anodin étant donné qu’il a été imprégné dans les mœurs du pays après la décolonisation. En effet, une fois qu’il eut acquis son indépendance de l’empire Britannique, il se donna comme but de se moderniser. Après avoir traversé de périodes politiques instables, il connut finalement la stabilité et une démocratie élaborée au début des années 1990 ce qui l’aida à se développer considérablement en lui ouvrant des portes vers de nouveaux marchés. Le Ghana a indéniablement une place prometteuse dans les secteurs économiques les plus importants, c’est-à-dire l’export, le commerce, l’agriculture ou encore les investissements. Ces derniers lui ont permis d’obtenir une croissance économique importante lui faisant passer d’un pays à bas revenus, à un pays au moyen revenus. Bien évidemment la stabilité et une structure économique organisée sont des prérequis pour qu’un pays puisse être considérée comme porteur d’une économie réussie de toute une zone. Néanmoins, en réalité derrières toutes ces forces et qualités propulsant le pays en avant, il présente de grandes failles internes qui doivent être corrigées avant que l’on puisse véritablement le considérer comme une voie d’entrée économique liant le reste du monde à l’Afrique de l’ouest. La corruption, la grande disparité dans la distribution des richesses, la compétition existant déjà sur le continent avec des pays comme l’Afrique du Sud ou le Nigéria qui ont déjà des places de leaders lorsqu’il s’agit de croissance économique, la fragilité de la démocratie sont parmi les problèmes et enjeux auxquels le Ghana doit faire face. Les plus riches s’enrichissent avec la croissance économique, tandis que les plus pauvres n’en bénéficient pas et subissent les conséquences de l’inflation. Actuellement, nous ne pouvons pas considérer le Ghana comme l’unique voie d’entrée en terme de prospérité économique en Afrique de l’ouest étant donné la contradiction qu’il y a entre la situation économique évaluée par les institutions ainsi que les progrès physiques du pays et celle vécue par la population au jour le jour étant donné la grande divergence de richesses d’une extrémité de la population à l’autre.
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List of Acronyms ECOWAS
Economic Community of West African States
ERP
Economic Recovery Program
FDI
Foreign Direct Investment
GDP
Gross Domestic Product
IMF
International Monetary Fund
LIC
Lower-Income Country
MDG 1
Millennium Development Goal 1
MIC
Middle-Income Country
NDC
National Democratic Congress
NGO
Non-Governmental Organization
NPP
New Patriotic Party
PNDC
Provisional National Defence Council
SBU
Strategic Business Unit
SOE
State-Owned Enterprise
UNESCO
United Nations Educational Scientific and Cultural Organization
UNICEF
United Nations International Children's Emergency Fund
WIR
World Investment Report
WTO
World Trade Organization
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Introduction When one arrives at Accra’s Kotoka International airport in Ghana, the first striking sign one can read is: “welcome to Ghana, the gateway to Africa”. I see this inscription every summer and wonder whether this statement is accurate or just a country willing to boast especially because of the term “Gateway”. A Gateway according to the Oxford dictionary is “a place regarded as giving access to another place” or “a means of achieving a state or a condition”. In this case, both definitions seem to fit the idea conveyed by the signboard: Ghana is THE access to Africa and THE means of achievement in the region in terms of Trade, geo-political situation, economic growth and development in general. There is a general debate among economists and the Ghanaian population itself as to whether the country should be considered a gateway to the African continent as a whole or specifically that of West-Africa where the country is located. For my research paper I decided to take a closer look at this debate by using the prospect of Ghana as a gateway to West-Africa instead of Africa.. Mainly because it would have been difficult considering the number of pages we were entitled to submit. Moreover, it was difficult to find books about Ghana in book shops here in Paris so I had to order most of them online. Another difficulty I was confronted to was to constantly maintain the discussion about what makes a country a gateway to a region in different fields of the economy. I also hesitated on writing my paper about Nigeria since it is equally a Commonwealth West-African country and is a country with growth potential as well. I finally decided to choose Ghana instead for specific reasons. Firstly because I would like to work in this country in the future given that is one of the booming African economies and it was important for me to get to know the country’s economic history just as much as its potential growth prospects. I wanted to know if it would really be worth it planning to leave Europe to settle in this country. My aim was to analyse the strengths of the economy and the geo-political situation with the help of information I was able to gather in order to discuss the current situation in the country and how it seems to have a bright future on the outside but lacks a lot of elements for further evolution, on the inside. Secondly, I did an Internship at the Harbour’s Authority there two years ago which led me to realize Ghana’s role as a hub to a lot of its fellow West-African countries notably thanks to the Gulf of Guinea (South coast) allowing the easy access to the country via shipping. Nonetheless, the main question is can Ghana really be considered as the doorway to West-Africa or rather as the key element for further expansion in the region? Does the definition of a gateway go beyond that of a dictionary when a country is involved? I was looking at understanding why it appeared 4
as obviousness to some that Ghana has all it takes to be the gateway and as a controversy to others contesting an apparent leadership. I wanted to know why a country with such a potential right from its independence hasn’t been able to exploit its potential and overcome hindrances as other developing countries in order to justify its alleged position as the “Gateway to WestAfrica”. Several discussions emerge: how did the change in state governance since independence play a role in the position Ghana has in West-Africa? Focusing on both the political and economic evolution over the past three decades how have the policies taken by the decision makers over these years changed the country? What are the characteristics that determine Ghana as a gateway? Despite having the image as a potential leader, why is the country still behind in certain fields of progress today and how can this situation be improved? I will first start by exposing the economic and political legacies that the country has received since its independence while highlighting the challenges it faced during the post-colonial period. I will then explain how this economic and political legacy have impacted Ghana today, presenting it as a possible gateway in some areas of the economy while arguing why it can’t be fully considered as one in some other areas. Finally, I will discuss how Ghana has to work on its weaknesses to transform them into strengths and tackle the main stakes in order to be completely regarded as a gateway to West-Africa and thereby fully justify the title of a leader.
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I.
The determining political and economic legacies Ghana has acquired since independence I.1
The Legacy of Independence and the attachment to the Commonwealth
The “Gold coast” is a former British colony that gained Independence on the sixth of March 1957 and became “Ghana” (homage to the African empire of “Ghana”). The country remained as a Commonwealth realm until it was declared a republic in 1960, in other words it had Queen Elizabeth II as its reigning constitutional monarch until 1960 and has been among the 53 independent and sovereign states of the Commonwealth of Nations ever since. It is important to know that after World War I, the colonial government established the use of export revenues to invest in economic and social infrastructure. This includes railways, a deep sea harbour, water supply systems, schools, hospitals, communication and electricity which led to accelerated growth but was later affected by the Great Depression in the 1920s and World War II. International commodities prices stimulated the resurgence of exports, especially of timber and cocoa helping Ghana become the world’s largest cocoa exporter by the late 1940s. Thanks to this, “by the time Ghana achieved independence, a process of peaceful political transition and one of the best infrastructure and education systems in Africa suggested good prospects for the country’s economic development and transformation”1. Independence was achieved under the leadership of a man named Osagyefo Doctor Kwame Nkrumah commonly known as Kwame Nkrumah. After he studied in the USA and in the UK during the Empire’s colonial rule, he came back to his homeland to lead the country to Independence just as India had done through Gandhi at the time2. His vision was to unite the nation and build a modern and industrialized country. Ghana was the first West-African country to gain independence which made it the symbol of democracy, success and freedom for the other African countries that were still under colonial authority and gave the country the role as a leader already at the time. Kwame Nkrumah in his autobiography describes the effort he put into investing in agriculture especially the cocoa industry since it was one of the country’s greatest resource. The agricultural sector was still the driving sector of the country at the predecolonisation era with 68% of the total exports in 1955. He established a Development Fund aimed at helping local farmers expand their business and in the long run extend this agricultural
1
C. Breisinger, X. Diao, S. Kolavalli, R. Al Hassan, J. Thurlow, A New Era of Transformation in Ghana, Washington: International Food Policy Research Institute, 2011 2 Kwame Nkrumah, Ghana: Autobiography of Kwame Nkrumah, Edinburgh: Thomas Nelson and Sons Ltd., 1982.
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development to other sectors. Doctor Nkrumah’s idea was to lay a solid foundation for the future generations in order to ensure they wouldn’t have to live on the cocoa industry alone. This vision is a success today since there is another driving sector of the economy today which is the service sector but that will be further discussed in the next part. According to the authors of A New Era of Transformation in Ghana3 measuring the income by per capita, Ghana was at a development level similar to those of Indonesia, Malaysia, South Korea, and Thailand after they achieved independence in the late 1950s and early 1960s. Ghana was rich in foreign exchange reserves due to its global dominance in cocoa exports. With these initial conditions Ghana was on a good path of achieving its modernization goals and confirming its leadership in West-Africa. Despite his efforts for Ghana’s modernization process Nkrumah’s rule was often judged as authoritarian and this slowly led to a collapse in the nation’s economy. Even though Ghana was in a good place to represent the doorway to West-Africa at the time the government wasn’t able to handle the economy to help the country prosper the way they had planned. The modernization approach of the state which was to industrialize the nation through a market-oriented and private-sector driven approach quickly created an imbalance in the macroeconomic stability. There were huge investments in infrastructure, health, education and state-owned enterprises (SOEs) which were detrimental to the financial capacity of the state. The idea was to continue in line with the economic model the British established while they were ruling the territory.
I.2
The evolution of State governance after the 1960s
Just as in many countries in the Africa of post-independence in times of economic distress and political mistrust, opposing party leaders of the state take advantage of the fragility of the situation in order to overthrow the current government. This is what happened in Ghana where the country experienced frequent changes of governments many of which came to power by means of military coup d’états in the nation. The first one was in 1966 where President Nkrumah was overthrown while he was away for an official trip. The second military impeachment of Ghana happened in 1972 followed by another attempt of a coup this time by Lieutenant Jerry John Rawlings who succeeded a second time with the 1981 coup establishing a national defence government the PNDC. It was the last coup the country experienced. His government adopted
3
C. Breisinger, X. Diao, S. Kolavalli, R. Al Hassan, J. Thurlow, A New Era of Transformation in Ghana, Washington: International Food Policy Research Institute, 2011
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an Economic Recovery Programme (ERP) thus shifted from a state-led development4 that had been used to regulate the economy till then. It mainly focused on macroeconomic stability and indirect measures to attract private capital. A New Era of Transformation in Ghana tells us political stability was established under democratic governance by a new constitution once Rawlings was elected president in 1992. Yet the correlation between solid institutions and development in African countries can be argued. Authors such as Jack Goody believe African countries were left astray with “artificial states” created by the colonialists. In the case of Ghana not only the post-independent governments were to be blamed, the state in which the country was left after the British departed was also detrimental to the country’s development. They established a highly centralized structure causing the Nkrumah government to follow the procedure knowing very well that the personnel was not as qualified and they weren’t financially armed to face the challenges that came along with developing the state. They lacked institutions to help them recover in terms of the economy. Here one can clearly say that indeed the building and establishment of solid institutions was crucial to ensure good governance and it would have helped the country avoid political instability between 1960 and 1992. Ghana’s neighbouring countries (clockwise) which are Burkina Faso, Togo and Ivory Coast were all French colonies and were still under colonial regime till the 1960s. That was the time, Ghana had the opportunity to rise as a model and show the way for them to prosper once they became Independent. Moreover the fact that the country was part of the Commonwealth, was supposed to entitle them to support from the United Kingdom and the other Commonwealth countries but it wasn’t the case. To some economists Ghana was armed with initial conditions for the development of the country, yet others question the modernization strategy based on exploiting the so called initial conditions of the country. A New Era of Transformation in Ghana indicate that the decisions taken by the post-independence government impacted Ghana’s macroeconomic stability but this point will be studied in detail in the following chapter. Democracy among the most important legacies Ghana inherited from the past governments for the 3 decades. Since the Rawlings government as I mentioned earlier, Ghana has known alternated and fair elections. In the 2000 general election Ghana experienced an alternated presidency since it was won by John Agyekum Kuffuor, leader of the main opposition NPP. Eight years later in 2008, the NDC which is the party created by Rawlings came back to power 4
The ERP was Ghana’s version of SAP (Structural adjustment programme) under the IMF and the World Bank
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through the win of John Atta Mills. The current President of the nation John Dramani Mahama from NDC was elected in 2012. The type of governance the Mr. Rawlings used to rule the country divides the country till today into two opposed opinions. Some heavily denounce his practice of military rule established through the coup d’état because to them it came along with terror, turmoil and violence. They accuse this regime of destroying their homes, businesses or peace. While others such as the Togolese politologist5 Combi Toulabo are grateful for the method he applied to govern. To him Rawlings succeeded in “political demilitarisation on the one hand and depolitisation of the military on the other hand.” The ex-President Rawlings exerted authority once he became President through impeachment. The fact that to him it was the only solution to lead Ghana on the right path is defendable because even though some Ghanaians blame him for his form of promoting modernization of Ghana, it was exactly in the same line of idea, Nkrumah the forefather had. Moreover for the parties who salute Rawlings’ alleged prowess in getting the country back on its feet particularly by rehabilitating a solid sense of democracy, their opinion is justifiable. It is justifiable because there has never been any tentative of overthrow ever since he ran and won the elections in 1992. This win in 1992 also proved that the majority of Ghanaians had approved of him being the legitimate ruler of the nation even though he was accused of corrupting the votes with his party. The country has been through a lot of political changes which have also impacted the economy over the years helping it develop solid assets which has placed Ghana on a higher scale in the region where it is located: West-Africa.
5
A specialist in political science
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I.
Leadership potential
After the difficult challenges Ghana has faced throughout the years with the frequent government changes and economic structure modifications, it has managed to achieve numerous positive attributes that could qualify it as a growing economy for the past 20 years. The fact that Ghana, ever since 1992, has become a peaceful country has been beneficiary to growth, trade, investment and therefore to development in general and has made the country to be often acknowledged as a political and economic example even though it still has lessons to learn.
II.1.
Symbolizing stability lays a solid background for leadership
First of all the stable governance and peaceful environment the country enjoys today either than for the economy, has also allowed Ghana to be fully active in the peacekeeping of the continent especially in West-Africa. The party that defends Ghana as a model for a democratic and tranquil Africa is hereby correct because Ghanaian troops are present in some of the unstable countries such as Ivory Coast, Liberia, Sierra Leone and DR Congo. It embodies the advocate and importance of peace in a country according to the World Bank and several NGO reports of UNESCO, UNICEF or Amnesty International. With this argument, Ghana can be rightfully qualified as the gateway to diplomacy and peace in West-Africa. A country’s geo-political situation has a direct impact on the economy. What is Ghana’s economic profile? II.2.
High investment attraction capacity doesn’t only count on political
stability The Ghanaian economy is one of the continent’s fastest growing economies according to the BBC6 and, the second largest economy of West Africa with 8% growth in 2013 right after Nigeria. Since 2012 the Ghanaian economy has revolved around the services sector accounting for roughly 50% of the GDP and employing 28% of the workforce. The country’s last reported official GDP from the World Bank was $40.71 billion with an average growth of 7.9% in 20127. This positive growth in 2012 enabled the country to move from the status of a low-income country (LIC) to that of a middle-income country (MIC), according to a report issued by the
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Report on “country profile: Ghana” See Appendix 1
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Center for Global Development8. This goal was set to be achieved in 2020 by the government’s “Vision 2020 plan”9 but was reached a decade earlier in November 2010. Ghana having a big advantage on Nigeria when it comes to the geo-political situation is on a good path to becoming the gateway for investment in the Sub-Saharan region. Until the ERP in 1983 there were no significant improvement in investment for economic development this was mainly exacerbated by the almost “non-existence of the basic and vital preconditions for economic development such as infrastructure, well regulated fiscal and macro-economic policies and practices, and political stability among others”10 as Doctor Akwetey highlights in his book. This recovery programme heralded the birth of investment and trade reforms. Since foreign investors and businesses are only likely to outsource into a country where they have the assurance they wouldn’t have to face any political unrest, more and more companies are opening subsidiaries in Ghana. Not to mention companies such as: Unilever or Nestlé that have been established since 1992 for the first and 198711 for the second, or more recent ones such as L’Oreal with their Dark & Lovely Strategic Business Unit (SBU). Another positive sign placing Ghana as a strategic gateway for investment in West-Africa is the ranking of political risk in countries. According to the Jeune Afrique12 magazine, the latest annual report of the Aon13 company Ghana was among the 4 African countries with the lowest risk and thus Ghana was the only West-African country with a positive result of 3 contrary to countries such as Ivory Coast (5). Even though Nigeria is the biggest economy in the region is has experienced political unrest for the past few years notably due to wars of religion which caused chaos in the country for a long period. The Boko Haram 14 triggered insecurity and tensions which was detrimental to the economy especially for FDIs. According to the World Investment Report (WIR) 2013, FDI flows into Nigeria dropped by 21.3 percent in just one year — from $8.9 billion in 2011 to $7 billion in 2012. Whereas Ghana on the other hand attracted US$ 7 billion of investment the same year.
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The Center for Global Development (CGD) is an non-profit think tank based in Washington, D.C, United States, that focuses on international development 9 Plan launched in 1995 which targeted higher growth rates for the country by 2020 10 Dr Lawrence M Akwetey, Investment Attraction and Trade Promotion in Economic Development: a Study of Ghana within the ECOWAS, : Thomas Nelson and Sons Ltd., 1982 11 Information taken from the Unilever Ghana and the Nestlé Ghana websites 12 Weekly newsmagazine that covers political, economic and cultural spheres of Africa with an emphasis on Francophone Africa and the Maghreb 13 A British Multinational Corporation that provides risk management, insurance and reinsurance brokerage. They evaluate the level of risk of a country for international companies who want to invest in the given country. The ranking is on a scale of 1 to 6, from “low” risk to “very high” risk. 14 Militant Islamist group in Nigeria
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Nonetheless attracting investment to a country doesn’t only depend on the geo-political climate, investment attraction also requires solid infrastructure which is a challenge Ghana faces especially in areas of water and power supply since the governments that have ruled the country since Independence failed to provide effectiveness in this field. Power supply is still one of the biggest problems because there isn’t a single month, even sometimes, week, where people don’t experience power outage. Foreign companies implanting branches in Ghana need efficient water and electricity supply and if their turnover will be handicapped by the latter they would prefer a country with better infrastructure. For example, nowadays the biggest competitors in terms of preferred destination for multinationals to open subsidiaries are the BRICS 15. They have preferential fiscal policies; they have efficient technology and solid infrastructure, flexible and interesting working policies as well as a cheap and efficient labour force. This is why for Ghana to stay competitive and continue to be most the attractive destination for investment in West-Africa it has to improve these areas of the infrastructure.
II.3.
High presence of competition but the driving sectors are helping the
economy maintain its competitiveness Another important heritage from the past that gives Ghana a strong advantage on its fellow West African neighbours is the agricultural sector. Agricultural crops including yams, grains, cocoa, oil palms, kola nuts, and timber, form the base of agriculture in Ghana's economy. It has always been a primary sector in the country even before colonisation as seen in the previous part, accounts for 30% of the total GDP and employs 50% of the total workforce of the entire nation. The World Bank’s “Doing Business” index ranks Ghana the best performer in West Africa by a significant margin16. It means that throughout the years from the 1960s till today, the country has managed to cultivate this industry just as the founding Father planned for it to happen. In this case, the capacity of this country to use this traditional economy driver has been very fruitful. Here, one can also assert that as to if Ghana can be considered the doorway for further agricultural expansion in the West, the answer would be yes. This sector is also the main driver of exports notably thanks to cocoa from the country to the whole continent and to the rest of the world. Ghana is the second largest cocoa producer of the world just behind Ivory Coast17.
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Brazil Russia India South-Africa See Appendix 2 17 See Appendix 3 16
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Exportation in Ghana is led not only by cocoa, but by gold and crude oil. Ghana is naturally endowed with resources such as gold, bauxite and diamond included. Gold is the leader of exports in Ghana and the country is the leader of gold production in Africa behind South-Africa. Yet there is still a factor that denies Ghana the title of the gateway in West-Africa regarding exports. The IMF18 explains that Ghana has lost about $1.5 billion over the last few years because of declining prices of gold and cocoa on the international market. According to the Bank of Ghana, earnings from gold exports dropped to $5 billion from 5.6 billion dollars for last year, while cocoa also declined to $1.6 billion from $2.2 billion in 2012. However, earnings from non-traditional exports went up by almost $600 million to reach $3.3 billion$. Ghana’s exports highly depend on cocoa and gold which could be a problem because the economy will be highly affected each time there are wild fluctuations in this sector. The fact that Ghana is in the Gulf of Guinea facilitates trade or to be more precise: import and export transactions. The country is endowed with two of the biggest ports in Africa: The Port of Tema and the Port of Takoradi port. The Port of Tema which is the biggest is strategically located 30km east of the capital Accra and spans on 3.9 million square meters and receives over 1650 vessels a year. The Takoradi port is located 225km west of the capital city of Ghana and 300km east of Abidjan the capital city of La Cote d’Ivoire. It is well connected to its hinterland which makes it the preferred and ideal gateway to the middle and northern parts of Ghana and the Sahelian landlocked countries of Burkina Faso, Niger, and Mali.19 These ports are strong hubs for the region and to reutilize the definition of the Oxford dictionary “a place giving access to another place”, in this case Ghana’s gateway position is implied by being THE door to access import and export activities for the landlocked countries mentioned earlier. Also, through bilateral treaties, Ghana enjoys quota-free access to the US and EU markets. In addition, the country’s ECOWAS20 membership makes it a useful entry point for importing products into the West African market. Ghana also allows for 100% ownership of local investments. What could be argued here is that, Ghana can be considered as a gateway to landlocked countries in West Africa such as these three but it
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Division Chief of Research at the International Monetary Fund (IMF), communicated by Thomas Helbling 10 April 2014 19 Information given by the Training Manager of Ghana Ports and Harbours Authority: statutory corporation which manages all the Port activities in Ghana. 20 Economic Community of West African States: regional group of fifteen countries, founded in 1975. Its mission is to promote economic integration in "all fields of economic activity, particularly industry, transport, telecommunications, energy, agriculture, natural resources, commerce, monetary and financial questions, social and cultural matters ....."
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can’t be considered as the gateway to shipping transactions to the whole region since there are other countries that also have access to the sea. Ivory Coast and Togo are Ghana’s direct competitors when it comes to Port activities involving the Gulf of Guinea, they share boarders with Ghana. Once again Nigeria remains Ghana’s main competitor in terms of Exports in the West; it is also endowed with one of the biggest ports in the whole of Africa: the port of Lagos. The rivalry among Nigeria and Ghana goes beyond physical aspects it also resides in the language. The official language in a country plays a great part in evolution of an economy whereby if the language is a commonly spoken one it becomes easier for the nation to attract or sign business deals. Both countries have English as an official language and that is a very huge asset. Ghana having inherited from this lingua franca21 thanks to the fact that it used be a British colony and its attachment to the Commonwealth obliging it to keep English as the official language, its position as a gateway to business is very crucial. Ghana shares boarders with three countries that are all francophone, thus when it comes to transactions involving English they have the upper hand since English is more spoken than French in the business world. But one must not forget that nowadays people have realized that it is a necessity to speak English, especially the francophone countries since they know that English is more utilized in business than French it is becoming more and more common to hear English in all fields of business. Being of the only English speaking countries in West-Africa, it could also be a handicap for Ghana in its logic of serving as the gateway to promote trade. As much as the language can be a means of facilitating communication, it can also be a barrier to communication. Since the francophone countries in West-Africa outnumber the Anglophone ones, they can easily trade among each other and leave Ghana behind. Beyond this aspect, there is also the issue of the currency. The francophone countries all use a common currency which is the Franc CFA which facilitates transactions and trade among these countries whereas Ghana with the Ghana Cedi currency is left behind. However, given the relative instability of the region, perhaps the maintenance of the Ghanaian Cedi which was stronger than the CFA in 2013 may hold Ghana in good stead in the short term. This door still stays open because for now talks among the ECOWAS countries are still currently being held
21
A shared language of communication used between people whose main languages are different. (Oxford Advance Learner’s Dictionary)
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as to whether Ghana would eventually join a common currency with these francophone partners or not. Concerning the economic crisis can indeed bare the crown of a gateway to sustainable growth in the region since it proved itself to be relatively resilient during the 2008-2009 world economic shock thanks to the high prices of cocoa and gold. But the discovery of crude oil in 2007 also helped the country maintain the economy better than the other countries in the West did even though the production of this oil commenced only in 2010. This offshore oil reserves according to the BBC is expected to provide a much greater boost to the economy in the future once it is well exploited and managed. The biggest problem nonetheless with this crude oil discovery was that it brought dispute between Ghana and its neighbour, Ivory Coast. Both countries claimed possession of it which created tensions and the BBC informs that even though Ghana is the rightful owner of this crude oil, no political measures or decisions have been taken in order to manage this recent source of income. It is clear that Ghana has the upper hand and big advantages in a lot of areas in the economy which could easily place it either as the current gateway or the future gateway in West-Africa but it is also very apparent that having advantages and favourable assets don’t automatically transform a country into the gateway of all aspects of development. Ghana presents a lot of weaknesses despite its numerous strengths in the region and for it to deserve the title of a gateway it has to possess all the characteristics of one. This can only be achieved through a complete assessment of these challenges in order to tackle them efficiently and make good use of these assets.
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II.
There are still significant challenges on the road to the gateway of West-Africa
Ghana’s position as the gateway to the region is still not complete and there are lot of challenges the country still faces today. When one takes a close look at these flaws, one notices that they can indeed be turned into opportunities and strengths and meet all the standards of a leading country.
III.1
South-Africa and the Asian countries represent both inspiration
and competition First of all the biggest challenge that awaits Ghana is the competition for the title of a west African gateway, competition from its neighbouring countries as well as other growing economies of the continent as a whole. Despite the debate about Ghana being the gateway to West Africa, the official gateway to the continent for many years now has been South Africa. This country has the adequate infrastructure and services which makes it an ideal first port of call for business. As it has been discussed earlier, Ghana lacks solid infrastructure to achieve a complete gateway for greater business than today. South Africa is the country that promotes the interests of Africa in the BRICS and the G20 since it is the only African member of these groupings. Ghana needs to learn from this fellow strong African economy to modify and elaborate its infrastructure for optimum investment even despite the fact that it is the leader of this area in the West. Considering South Africa’s geographical position it is relatively far from the rest of the continent, thus far from many major African markets. Moreover in spite of the high level of FDI attraction, Ghana has failed to attract FDI in manufacturing according to the book A New Era of Transformation in Ghana. The main reason resides in the fact that the government’s efforts to improve the investment code and strengthen property rights have not had encouraging results yet. This is why Ghana has to use its advantageous and strategic position to attract more foreign investment because foreign investors look into having as much return on investment as possible, in other words are aiming at conquering as much markets as possible. This opportunity if well utilized can propel Ghana to becoming the gateway to investment in Africa on the long run. In the same idea of learning from other countries, one can refer to the post-independence era in the 1960s when Ghana had approximately the same income level as some Asian countries such as South Korea, Malaysia or Thailand. Some authors such as Goody argue that most African 16
countries were handicapped by the fact that the colons left most of the colonized African countries in chaos. According to them they jeopardised these nations in several ways: in generating institutions and governance that support rapid economic transformation. To them, this was wrong on the behalf of the British in the case of Ghana, knowing that in precolonial times, Africa was characterized by traditional societies with limited bureaucracy and formalized Rule of Law. This argument is true but the fact remains that Asian countries were also colonized and became independent but they managed to build a solid economic model helping them benefit from a prosperous economy today which Ghana could have also done. The Green Revolution type of growth is what they seized as an opportunity to expand and open to new markets. It is a type of agriculture which when well managed can benefit the entire economy. Given that Ghana’s economy is strongly driven by this sector it will be of their best interest for the government to invest more in the agricultural sector. Not only should these countries be a model to follow but the Latin American countries as well, the BRICS are the perfect example of how a country can quickly develop into the position of a gateway through a fast growing economy.
III.2.
Ghana needs to learn how to handle partnerships with foreign
countries Better cooperation and coordination with the developing world can also lead Ghana to become the gateway to further expansion in West-Africa; it could become the point of connection regarding trade between the region and the western world. The fact that Ghana has bilateral agreements with the US and the EU is a huge opportunity to promote better trade since both parties enable Ghana to benefit from free quotas. Moreover recently, the country has been holding negotiations with both the ECOWAS organization and the EU to sign an agreement which will allow Ghana to have 100 percent access to the European market22 while the EU countries will have 75 percent access to the Ghanaian duty free and quota free according to the Joy FM23 website. Even though the EU represents more than half of all Ghanaian exports Ghana would lose a lot of money if they should sign this Agreement. According to the UN the country could lose about 300 million dollars in revenue every year. This opens up another debate the has existed for a long time now concerning how African countries are disadvantaged in terms of quotas and tariff taxes in comparison to the rich countries. To correct disparities in trade has
22 23
The Economic Partnership Agreement (EPA) Ghanaian local news radio station
17
always been one of the main goals of the WTO but it has still not been achieved so the poor countries have to maintain their trade relationships with the rich countries in spite of the fact that they are highly disadvantaged. Ghana has to be careful not to lose more than it will gain from this future partnership while still making sure they maintain a favourable relationship with the EU, vital market to the nation’s economy. Talking about vital industries to the Ghanaian economy that are likely to help it become the only gateway to exports from the rest of the world to Sub-Saharan Africa, the crude oil exports is a field that Ghana has to closely pay attention to, exploit properly and manage well. III.3.
The positive growth of the economy is not extended to the whole
population Concerning the repercussions of the economy one can think about the population on different angles: in terms of distribution of wealth and the work force. In these two fields Ghana has undeniable potential which is why one can classify this as an opportunity to create a gap between the country and the other West-African countries but presents important weaknesses as well. First of all concerning the distribution of wealth more precisely poverty, the United Nations Development Programme declares Ghana is one step ahead simply because it is bound to become
the first Sub-Saharan African country to achieve the first Millennium Development Goal (MDG 1) of halving poverty before the target year, 2015. This is highly contestable due to the fact that just as most of African countries the disparities among incomes from one class of the population to the other are huge. Approximately the quarter of Ghana’s population still lives below the level of poverty. The question that comes immediately to mind is: who benefits from this growth? Even though one can read articles about how Ghana is the West-African country that creates millionaires at the fastest rate behind east African countries such as Ethiopia, at the end of the day the positive growth of the Ghanaian economy doesn’t benefit to the entire population but mostly to the rich and the high-ranking officials.
Most of the Ghanaian people I interviewed, both young actives and old admit “there has been real improvement in our country and there is money in the system, but the government officials are the ones using it”. Most of the people argue that Ghana may be beating records of high growth when it comes to the GDP but the inflation is highly affecting their daily lives. Prices keep rising especially petrol; there has been a devaluation of the local currency, the cedi all due to inflation. Due to the fact that the currency is losing ground, the exchange rate is in favour of 18
foreign currencies they get to have a much higher purchase power not to talk of workers in the country that are being paid in dollars. In other terms, once more foreign companies and the government officials are the ones benefiting from the inflation. “Taxes levied by the government are massive” an interviewee explained to me. It is becoming more and more difficult for lower income workers to live on only one job according to an interviewee in an article in the Jeune Afrique magazine24. The majority of the youth interviewed disputed the fact that the crude oil industry concerned the entire population. To them even though it seems to be part of the drivers of the economic growth, they have the percentage of the population that can claim involvement in this area of activity is very little. Furthermore, there are striking figures when one takes a closer look to the salaries allocated to government officials. According to the BBC25 in 2012 there was a salary increase for Ghana’s president, ministers and other top officials which was highly criticised especially by anti-corruption campaigners. The president’s salary went up from about $4,240 to $6,357 tax free and the ministers aside their new salary being increased to $4,770, they also have benefits including the use of two cars, a house with staff and an entertainment allowance. These figures are extremely shocking given that the monthly minimum wage in Ghana is about $75 and civil servants, such as teachers earn below $500. The poverty rate in Ghana may be experiencing improvement but the reality remains that there need to be concessions made on the behalf of the government especially in terms of the amount of money being spent. A solution would be a decrease in salary and reduction of these benefits if not complete removal of the latter because if the country has to develop at a better pace there would have to be restructuring in the economy starting from the internal budget.
III.4.
Democracy, stability and peace are being threatened by corruption
and lack of clear crude oil policies What is also debatable is the apparent democracy in Ghana. The country seems to be a strong example of democracy and the possible leader of this type of governance in the region but it is a façade. As a matter of fact this democracy remains feeble in many ways. There still are accusations of corruption concerning the elections. As I exposed the peaceful and fair elections that have been held since 2000 according to the main opposing party NPP, to the current
24 25
« A qui profite le miracle Ghanéen »? Published in January 2014 Article from the BBC website « Anger at Ghana salary increase for politicians »
19
governing one NDC for the past 2 general elections there has been fraud and conspiracy on the behalf of the winning party. The NPP after the last general election in 2012 accused the NDC for stealing votes across the country, article from the BBC26 affirmed. These accusations later led to the leader of the party taking the case to the Supreme Court. While awaiting the verdict the country was in anxiety of a possible retaliation from the losing party which could have led to a national conflict. Nevertheless after the announcement that Nana Akuffo Addo had lost the law suit there was no such event. This showed that the sense of democracy in the country was very strong since the defeated party accepted their defeat without retaliating with any source of violence but it also proved that corruption is still contested and has to be fought in order to remain the leader of democracy in the region. The discovery of the crude oil in 2007 has been beneficiary to the economy not to mention that it helped this nation survive the crisis as I explained in the previous chapter but the problem is that, given the way this new source of growth is being handled one can wonder if it should be seen as a blessing for this country or rather a curse. This is to say that if the government doesn’t implement policies in order to protect it and set regulations in order to determine how its usage is supposed to be monitored it could bring negative outcomes to the state especially tensions in the political realm which could even lead to political unrest. This would mean that Ghana’s established image as the gateway to peace in West-Africa and even the whole of Africa would be harmed and make Ghana gradually lose the assets it has managed to build over all these years. African countries such as Congo for example have been experiencing political unrest and war partly due to the fact that both foreigners and citizens of the country are fighting over natural resources such as gold, diamond or cocoa. The government is often blamed by Ghanaians for using the money generated by the crude oil exports simply because just an insignificant percentage of the population has access to it. Therefore it only appears as natural for them to say that if the officials are not implementing laws to regulate its exports and usage it is simply because the latter won’t be able to have access to it for their own personal benefits as they have done so far. This demand for policies is highly linked to corruption as well because the same government accused of corruption seems to be exploiting the income produced by this natural resource.
26
« Ghana election : opposition NPP alleges fraud » Published in December 2012, right after the general election final results
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Ghana’s has undoubtedly reached a high level of development which could make one optimistic about it becoming the gateway to West-Africa in all the fields of the economy studied above but as of today, it presents many weaknesses which could make its position stagnate if not worsen. The best solution would be for the Republic to correct its flaws in order to succeed as a developing country.
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Conclusion The sign at the Kotoka airport in the capital of Ghana Accra doesn’t indicate Ghana as “the gateway to Africa” for a non-significant reason. Ever since the country gained independence, the vision was indeed to become the gateway economically and politically speaking. The country enjoyed its initial development preconditions including an already established key sector for a prosperous economy: agriculture, as well as a harmonious independence process unlike countries like India and a strong educational basis allowed by colonisation. Even though it went through a long period of political unrest with several overthrows of political leaders, it eventually has acquired a stable democracy since 1992 meaning, three decades today. Given the certain level of instability of several countries in West-Africa, tranquillity has enabled Ghana to progress over the years helping it develop the economy with positive results notably in investment, export or trade. For this reason it is often considered as either the current or the future gateway to West-Africa to some economists. With a closer analysis this term of “gateway” doesn’t fit with the progression of Ghana so far. It has attributes of a leader undoubtedly yet, so far as the country’s rulers don’t take actions to modify the institutions and reform certain laws it may never get to the stage of a gateway whereby it would represent the main connection between the rest of the world and the region. As of today Ghana can be considered as one of the possible means for further expansion in West-Africa. The biggest problem relies in the fact that the figures and physical signs of development don’t match with the living standards of a significant part of the population. The assessment of the economic development of countries based on the GDP alone is not enough to determine how promising the economy is. The notion of democracy highly promoted by Ghana is hypocritical in a way because in reality it is not the people who have the power but the latter is rather in the hands of the government and them only. One can wonder and debate if the current government officials would really want to change policies aiming at generating a better distribution of wealth to the detriment of their benefits. If this frozen system of “democracy” carries on maybe one can hope for change from a different government or yet still some people advocate the intervention of an external force to restructure the entire system such as another military rule.
Bibliography Books 22
Nkrumah, Kwame. Ghana: Autobiography of Kwame Nkrumah. Edinburg: Thomas Nelson and Sons Ltd., 1982. Akwetey, Lawrence Mensah. Investment Attraction and Trade Promotion in Economic Development: a study of Ghana with the Economic Community of West African States (ECOWAS). Oxford: Trafford Publishing, 2006. Breisinger, C., Diao, X., Kolavalli, S., Al Hassan R. & Thurlow, J. A New Era of Transformation in Ghana. Washington: International Food policy Research Institute, 2011. Okyere, Bonna. Ghana: Conversation and Development. : AuthorHouse, 2009. Orsenna, Erik. Voyage aux pays du coton. Paris: Le Livre de Poche, 2007.
Internet sources Dr. Awuah, Robert, “Is Ghana really the Gateway to Africa”, Ghanaweb, April 23, 2005. , accessed January 6, 2014. Hirsch, Afua, “Ghana: West Africa’s haven of stability has its own challenges”, The Guardian, October 30,
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, accessed January 15, 2014. David Weiss, “Ghana- -the gateway to Africa”, The Huffington Post, April 26, 2012.
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accessed 15 January 2014. Mcternan, Billie Adwoa, “A qui profite le “miracle” ghanéen?”, Jeune Afrique, January 14, 2014. , accessed January 20, 2014. Smith, David, “Ethiopia hailed as ‘African lion’ with fastest creation of millionaires”, The Guardian, December
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Kouamouo, Théophile, “La
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Appendix 1 African GDP growth between 2007 and 2011
One can see that in the West between 2007 and 2011, Ghana had the highest annual percentage change in GDP with an average between 7.50 and 8.25% ahead of Nigeria. The average GDP per person was also 1.6% in 2011 just before it attained the status of a MIC in 2012. Sources: IMF; The Economist Intelligence Unit (2011)
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Appendix 2 The World Bank’s “Doing business” Index ranking (2012)
Ghana was by far the safest place to do business among the Sub-Saharan African countries according to the World Bank in 2012. It was ranked at a better position than one of the BRICS: China which is a country with thriving business activities with MNCs increasing more and more. This shows how promising the geo-political situation in Ghana could impact business. Source: The World Bank (2012)
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Appendix 3 World largest cocoa producing countries (2013)
One can see that Ghana is the world’s second largest cocoa producer after Ivory Coast, with 18% of total global cocoa production. Cocoa exports represents 30% of the country’s total exports, therefore an important share of the GDP. Source: Deutsche Bank
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