Ghana: The model colony; What happened?

Ghana: The model colony; What happened?

A t independence, Ghana was one of the countries that was regarded to as a “Model Colony”. After sixty years, does that statement still holds water? After being a sovereign nation for 60years, the everyday Ghanaian expects to have a portable and constant flow of water; constant electricity supply, available healthcare centre etc., which constitute the basic amenities needed for everyday living.

This should not become a political campaign message as we experience in this modern age politics neither should governments’ be priding themselves in the asphalting of residential roads. But that is the reality Ghana faces after six decades of self-rule.

Unfortunately, national campaign messages that take leaders to the Flagstaff House– the seat of government– are drawn along lines that should be reserved for district assembly elections where assemblymen and, in the future, district chief executives are elected.

The building of schools, hospitals and feeder roads should be campaign promises reserved for the local level but in Ghana, such promises are the regulars at national rallies.

While other countries prioritize the overall economic transformation of the nation; in Ghana, we prefer to talk about building boreholes and mini irrigation dams for farming communities in remote areas of the country.

Meanwhile, for the everyday hopeful Ghanaian; noting, there are millions of hopefuls including me, you and the next person; all that is craved is a well functioning economic, social, cultural, religious and civil system.

A system where every citizen has equal access to basic amenities including clean water, uninterrupted supply of electricity, good roads and transportation system and above all a cheaper cost of living that guarantees a good standard of living irrespective of where the person is located, social status, or financial strength. The basics must be covered.

The above are necessities taken for granted in the developed economies in Europe, North America, and parts of Asia, but in this part of the world, Ghana, West Africa and Africa, in general, they have become luxury to the everyday man.

In the cities of Accra, Tema, Kumasi, Takoradi, and Tamale, one is very lucky to drive on a completely tarred road from work to home or to school or church on Sundays.

You thank the electricity provider if one has uninterrupted electricity in a month, same applies to the supply of water. If you go to the market or shopping mall, you automatically expect prices to inch up, even if marginally.

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The model colony

But how did we get here? When Ghana achieved independence in 1957, the nation was described as the model colony: it was a colony that was left with a substantial foreign exchange reserve, about £200million at that time, equivalent to about three years of import cover, according to some “economic historians”.

That was not all: it had a well functioning system where gold, cocoa and timber were raking in the best of foreign exchange, quality human capital to take over from the colonial masters and a civil service structure that was comparable to none in sub Saharan Africa, apart from apartheid South Africa. Topping all the gold and cocoa was a visionary leader, Dr. Kwame Nkrumah whose vision was not just to develop Ghana but see Africa grow in tandem.

He made no secret of seeing a united Africa that needed to attain its independence just like Ghana and develop alongside.

The radical change and its repercussions

A few years after independence, historians and economic analysts noted that Dr. Kwame Nkrumah, despite his grandiose ideas of developing the nation, followed the cautious approach of the colonial government by relying on export of raw materials whiles waiting for the rest of the continent to attain freedom but by 1961, he put into action his plan for aggressive industrialisation.

He established factories all over the country to take advantage of the raw materials we produce in immeasurable quantities and export in that raw form.

His vision was to build these factories to empower the Ghanaian that what he enjoys everyday from the West can easily be made here. There were factories for cocoa, sugar, coffee, jute, tomatoes production. His vision was to place the factories right where the raw materials were.

That is why we had sugar processing plants in, for example, Asutuare in the Eastern Region, because of the high production of sugarcane in that region. Despite his good intentions, most of these institutions did not survive due to several factors.

Some included mismanagement, lack of quality human capital to manage them, over-capitalisation, and excessive political interference which forced those who had the expertise to move away. Today, remnants of these decayed factories can be seen in parts of the country including the warehouses built to store the products.

Even though successive governments, including the military governments, tried to revive some of them, they still failed.

Some historians and economic analysts accused Nkrumah and his colleagues of rent-seeking and thievery which led to the collapse of these factories and institutions and played a key part in the collapse of the economy.

Dr. Kwesi Botchwey’s views

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But Dr. Kwesi Botchwey, the longest-serving finance minister Ghana has ever had, delivering an address as the guest speaker at the launch of the Economic Club of Ghana (ECoG), noted that despite the aggressive change in plan by Dr. Nkrumah, it was not for purposes of rent-seeking or thievery, as noted by some historians.

He explained that Nkrumah’s idea was to change the future of the country from an over-reliance on the

export of raw materials to an industrialised one with manufacturing at its core which will create the jobs that matter and produce goods locally.

He explained that the reasons the factories and companies that were established from 1961 to 1965 couldn’t survive were due to a lack of proper human capital simply because the ruling party, the Convention People’s Party (CPP) was a nationalist independence party and “hadn’t quite yet re-engineered itself into a party of cadres capable of leading that kind of revolution,” he revealed.

Despite criticising the lack of human resource and mismanagement of these institutions, about 55 in total, Dr. Botchwey noted that the remnants of those revolutionary ideas are still found dotted around the country today with some of them still as relevant as they were in the 1960s especially in the financial services industry with GCB Bank and SIC Insurance Company, being two of the biggest financial service players.

After Dr. Kwame Nkrumah’s overthrow, the economy saw major upheavals. When many thought Nkrumah’s removal was the riddance of a bad leadership, they couldn’t believe what came next.

Though the second republic brought in some reforms which liberalised the economy and empowered the private sector; that was short-lived.

Then came the worse anyone can think of. Ghana fell into a state of sustained economic decline. In the 70s and 80s, there was a sharp drop in national output, real output growth over this long protracted period of national decline came to a standstill and then turned negative, meaning that virtually every year Ghana was retrogressing.

“By 1983, when I had the misfortune of being called to minister into finance, inflation had soared to 142percent– these days we fret when inflation hit 25percent– output growth turned negative, and per capita income collapsed.

There were such widespread shortages. We travelled to Lome to buy basic things such as milk or sugar. We were not surprised when almost 10percent of the country’s population, over a 1million people, at the time, fled to neighbouring countries and beyond in search of greener pastures.

The nation was just on the brink of total disintegration and collapse but we managed to dig ourselves out of this hole,” Dr. Botchwey pointed out.

The return to normalcy

Dr Botchwey, in his address, explained that once the government did away with control prices, it quickly realigned relative prices, especially foreign exchange prices, to restore incentives for production, savings and investment.

This saw a slow devaluation of the currency but was called “the re-pricing of the cedi” to assuage the fears of Ghanaians who felt devaluation would make the currency worthless. Gradually, through economic mechanisms, he noted, brought the value of the local currency to where it should be– almost the level of the black market.

Then came the forex bureaux, which businessmen and women thought was a means to arrest black market operators.

“But after some time, when market operators realised there was no arrest made it saw a boom and monies easily changed hands and these bureaux accounted for a substantial amount of forex changing hands,” he said.

The structural adjustment programme, according to Dr Botchwey, was successful in restoring financial stability, bringing down inflation to 20percent, external reserve position improved tremendously, cocoa production improved because the farmers were now being paid production prices that covered more than the cost of production and all that set a tone for economic recovery.

“The pathways to self-destruction are many and easy to find but those for corrective action are few and painful. As a nation, when we decide to live beyond our means, borrow, print more money and render our currency worthless, or set in motion about of fiscal instability, that is easy and might even win you an election but then the chicken will come home to roost and then another painful correction will start.

Fast forward: Ghana has enjoyed relative stability over the past two to three decades which culminated in the oil boom of 2010 which saw growth peak at 14.4percent in 2011.

But with the following year seeing an election, the gains chalked were eroded with a huge deficit, which was as high as 12percent of GDP and that deficit, coupled with a drop in commodity prices on the world market, and energy production challenges domestically signalled a three year economic meltdown which saw the economy growth shrink and led it to the International Monetary Fund.

“The government decided that it needed the IMF. So the extended credit facility made some sense to me. Sometimes we need that external institution when our homegrown policies consistently fail us. Currently, there are hopeful signs that a recovery is underway,” Dr Botchwey noted.

Lessons

Dr Botchwey, in his delivery, worried if, as a nation, Ghana ever learns its lessons. As the longest-serving finance minister and a very active academic and politician, he has witnessed all election from 1992 where a budget surplus, equivalent to 0.2percent of GDP in 1991, metamorphosed into a deficit, equivalent to 5percent of GDP.

“If you look at our economic history, you will find that in every election year, there is a problem. All of them; there have been problems. Slippages mount then we sweat and struggle to get back on track. Sometimes I wonder if we learn lessons.

We are going through a period of continuous fiscal consolidation to correct all the problems that we have had. One of the fundamental problems we have is that all these problems of instability and discontinuity in policy are simply the problem of fiscal discipline and that must be addressed immediately.

When we do not manage our fiscal balances well and the deficit soar and we finance it with massive bank borrowing, the results are always clear: you reap a depreciated currency, soaring inflation, rising prices, etc,” he noted.

What should be done?

In his assessment, what should be done to put Ghana on a sustained path of growth for decades like Singapore, South Korea, Japan, Malaysia and other European countries did is “to be disciplined in expenditure while increasing revenue drastically”.

To him, the practice of quoting ambitious and unachievable revenue targets and consistently missing them should stop alongside the over-reliance on aid and grants, loans, domestic and foreign, to build infrastructure and even pay for goods and services, should become a thing of the past.

He bemoaned that after six decades of independence, the nation’s budget is still significantly supported by donor funds. “Our revenue base as a nation is not growing fast enough to catch up with expenditure.

Our tax effort, what we collect as a measure of what we can collect, is not just disturbing but abysmal. When you take your wages, interest on domestic and foreign debt, and transfer to statutory funds, there is nothing left.

Happily we have passed a law to cap the transfer of funds to these statutory funds but there are vulnerabilities in the state owned enterprises, the financial sectors and those vulnerabilities must be controlled. The energy production companies including the Volta River Authority (VRA), Ghana Grid Company (GRIDCo), and the Electricity Company of Ghana (ECG) need their revenue systems restructured for efficiency.

A robust and resilient financial system is crucial for sustained economic development,” he noted.

How the club can shape the discourse in the country.

In his summary, he noted that The Economic Club of Ghana has the potential to become hugely important to help shape public discourse in the country but a great deal will depend on the expertise and professionalism the club itself will be able to mobilise.

He urged the club to stay above the partisan politician system and lead the conversation on issues that promote economic and national development.

That, to him, is the only way the club can stay relevant and attractive to members while inspiring the millions of Ghanaians to achieve more through other economic means other than politics.

“Only by doing this successfully and demonstrating the capacity for some analysis, can you lead the way while crowding in the expertise in academia and other stakeholders and make our country as great as we want it.”

Dr Bawumia sees beyond macroeconomic stability.

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Vice President, Dr. Mahamudu Bawumia, who was the special guest of honour at the launch of the club, in his address, noted that macroeconomic stability alone, though difficult to practice in the country by successive governments, is not enough to change the course of this country.

“There is an understanding that every government

tries to achieve macroeconomic stability but some have been more successful than others. Since 2006 every forecast for the budget deficit has been missed and this is because of very high revenue forecast that are not realistic or sometimes high expenditures.

We also should understand that while macroeconomic stability is necessary, it is not sufficient. There has to be more to transform an economy than macroeconomic stability.

What we really require is a structural transformation of the economy where you need stability that allows you to pursue policies that can structurally transform the economy from a commodity dependent one to more value addition to our natural resources and industrialisation,” he averred.

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Explaining that, for the most part, leadership always live with and talk problems, but do not have definitive solutions, he noted that the agenda of this government is to get into the mould of solution oriented politics where “we can tell that in three years’ time we have 100percent electricity coverage.

That is the sort of thinking we are bringing in

solving economic problem. For far too long our nation has been faced with myriads of challenges, some of them unique to our challenges and some of them not so unique to us.

For those not so unique to us, we can learn from others but for those unique we have to find our own solutions to them,” he added.

Consistent engagement with the experts

Dr. Bawumia noted that with consistent engagement in dialogue and discussion among relevant stakeholders the key to opening Ghana to a new structural transformation is here.

“As a government, we do not assume the know-it-all-philosophy but rather believe that a great rich set of ideas are inherent in people like you who have come to form The Economic Club of Ghana and we are ready to tap into this body of knowledge and expertise.

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Looking at the economic history of Ghana, there have been great thinkers and stalwarts who have been part of the management of the economy. It is not really being a lack of economists that is part of the problem or it is not that we have not had good thinkers but we have had some fantastic thinkers who have preferred a lot of solutions.

What we have not really being able to do on a consistent basis is applying a lot of those solutions over the long term. You tend to have a few good years and a lot of bad years and that

type of inconsistency has bedevilled us as a country,” he noted.

Gov’t ready to support the Economic Club of Ghana

He strongly believes the time has come to marshal Ghana’s intellectual capacity to work together to find solutions to the problems so that the common man or woman on the street will see the club not as an economic club but a club to enhance the public good and promote collective socio-economic goals in society.

“The timing of this launch couldn’t have been any better. Our objective as a country has been to pull Ghanaians together, build a resilient and stable economy on the strength of our own human and natural resource guided by well thought out policies and strategies,” he indicated.

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In launching the club, Dr. Bawumia noted that in developed economies, cities have their own economic clubs and these clubs, some as old as 150 years, have contributed to the development of their respective cities and countries.

“They regularly invite presidents, global business leaders, scientists, and distinguished academicians

to address members. And I want to see the Economic Club of Ghana host such iconic individuals, both local, continental and global.

The Club indeed comes in at an appropriate time, and I can assure you of the support and commitment of the government. We shall be open to ideas, recommendations, and suggestions in relation to the formulation and implementation of economic and social policies, to the extent that they support both the short and long term development agenda of Ghana.

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I urge you to be firm and unwavering in your analyses and discourses. There should be no fear whatsoever in the presentations of your views, critical or not because that is what makes democracy, and our kind of democracy beautiful and allows for economic development to be carried out in a free and fair society,” he advised.