Sam Jonah’s Axe: No One is Sacred

The recent speech by Sir. Sam Jonah (Sir. Sam) as a guest speaker at a Rotary Meeting has resulted in heated debates on and off social media, and, as is usually the case, been taken up and amplified by the traditional media.

Sir. Sam’s epistle was as expansive in subject-matter as it was explosive in the number of “interest groups” it addressed. All estates of the realm had their fair share of the royal reprimand: The Executive Branch, Legislature, Judiciary, Fourth Estate (Media), and what I will now describe as the Fifth Estate, into which I group Think Tanks/CSOs and the groups we have largely come to describe as “Middle Class” and/or “Elites” etc. Click ro read speech

In concluding, Sir. Sam proposed the following for improving the quality of governance, growth and development in Ghana:

 "The constitution must change," i.e., constitutional reform to even out, to a large extent, the balance of power between the three arms of government

 "Re-evaluate the structure of our economy," i.e., affirmative action to indigenise some high-value sectors of the economy (not exactly changing the structure but you get the drift)

 "We need to develop our industrial base," i.e., that the government industrial development programme, “One District, One Factory (1D1F)” is a good start but does go far enough, and

 "Last but not least, we must completely overhaul our educational system," with a focus, not only on STEM but also TVET

With the exception of probably the first proposal which may not have received the same level of urgent, aggressive attention in the first term (note that except, probably for Parliament, the Judiciary, and other governance institutions have received unprecedented attention and resources), the Akufo-Addo government has performed creditably on the rest. There is certainly room for improvement and we must look forward to the regular contributions of eminent citizen-investors like Sir. Sam towards the process.

To his credit, Sir. Sam acknowledges the progress we have made since independence and adds that it must not lull us into complacency. 

Who, then, can quarrel with these sentiments? Not me, certainly.

My first impression of Sir. Sam’s speech, as I am sure is the case with many of you, was that it is coming from a place of passionate patriotism and a deep desire to see Ghana develop faster and “better.” It was appropriate for the occasion, thought-provoking and sobering.

Reflecting further however, it also came across as excessively depressing. 

If one were NOT to read it with a level-head, as unfortunately has become the attitude of thin-skinned “partisan warriors” in our wildly contentious political space and discourse, it would be easy to be outrightly dismissive, to question motives, and to go on the offensive, depending on which of the “estates”’ ox is seemingly being gored. 

But Sir. Sam is an influential voice in global and continental business and his views carry weight in important circles. Right, or wrong, his perspective on aspects of our development journey demands level-headed attention, especially by government. It is for this reason that his commentary cannot be allowed to pass without scrutiny, or being critiqued, even if only to “set the records straight.” Afterall, it is through such iterative process that better ideas gain traction and, hopefully, implemented. 

So here are the axes I have to grind with Sir. Sam’s axe.

My Axe: Facts are Sacred

While no one was, rightly, spared Sir. Sam’s axe, the facts must be, if for nothing at all, sacred.

I will take the liberty of assuming that one has read his speech in entirety, and proceeding from that, note that it serves no useful purpose responding to everything he touched on both for brevity and to enable us concentrate on only the most essential in my view. I therefore limit myself to five issues on which I think the facts must be made whole for the injuries they have suffered in how they have been treated by Sir. Sam.

Fact 1: The Economy

I agree entirely with Sir. Sam when he says the economy keeps him awake at night. Everything rises or falls on the back of the economy. “A strong economy creates opportunities, and inspires more people to start new businesses. In much the same way, a strong economy encourages existing businesses to make new investments, to grow, and expand; more and well-paying jobs are created, the private sector hires more people, and citizens prosper. Public sector-driven job creation interventions and initiatives also require a strong economy. Social services such as the National Health Insurance Scheme, free quality basic schools across every part of the country, the School Feeding Programme, good roads and a wider and cheaper transport network, affordable housing, stable and affordable electric power: all of these require a strong economy.” – NPP 2016 Manifesto, p3

I disagree, however, with Sir. Sam’s narrow analysis of the 2020 macrofiscal outturn, and even more so his foreboding conclusion that his narrow analysis “is telling us something.” 

First, a minor technical issue: Quarterly GDP estimates are based on short-term indicators unlike the Annual GDP, and therefore is potentially erroneous, as he did, in simply averaging quarterly GDP estimates and drawing conclusions from it (See GSS Quarterly GDP Reports).

My principal disagreement with Sir. Sam, however, is the inexplicable failure to place his review of the 2020 macrofiscal outturn within the context of the global economic and financial meltdown occasioned by the Coronavirus Pandemic (Pandemic)!

I find this omission puzzling because the Pandemic is a giant, unmissable elephant in every room, and especially the kinds of rooms in which Sir. Sam would normally host investment and business meetings. It is next to impossible to find a single business, economic, or investment brief prepared by the greenest of analysts anywhere that will not place 2020 outturns, and indeed forecasts for 2021 and beyond, within the context of the Pandemic.

By inviting his audience, domestic and international, to draw conclusions a la “this is telling us something” from his uncontextualized analysis, Sir. Sam is inviting us to suspend belief that what should be the most consequential variable in economic analysis for 2020, the Pandemic, is indeed of no consequence. That, I am afraid, we cannot do. I don’t know which island he spends his time on these days, but there’s hardly a corner of the globe that has remained untouched and unencumbered by the Pandemic. It is a rather perplexing omission.

I genuinely would like to know what Sir. Sam’s response to Angela Merkel, the German Chancellor, would be when she said: “We’re doing whatever is necessary, and we won’t be asking every day what it means for our deficit” regarding Germany’s response to the Pandemic (Financial Times/FT, March 2020).

I can hear the chorus of “but why compare ourselves to the likes of Germany etc?” Well, Sir. Sam agrees with me. He advises that “we really ought not to take comfort in comparing ourselves to the rest of Africa [and] that we must compare ourselves to the rest of the world.”

The pandemic, as described in its early stage by the Managing Director of IMF, “is a crisis like no other. It is more complex, with interlinked shocks to our health and our economies that have brought our way of life to an almost complete stop…The outlook is dire [and] we expect global economic activity to decline on a scale we have not seen since the Great Depression.”

A year down the line, it has forced governments across the world to "spend," in order to save lives and protect livelihoods, a staggering US$16 trillion. This has resulted in global Debt-to-GDP rising to 97%, projected to be 99% this year, 2021, with average fiscal deficits reaching 12% for advanced countries alone. Global growth also contracted by an estimated 3.5%. (IMF January and April 2021 Fiscal Monitor). For example, the United Kingdom, in 2020, suffered its deepest contraction in 300 years since 1709 (Wall Street Journal/WSJ February 2021).

Before the Pandemic, Ghana’s economy was on stable ground, having experienced a positive turnaround from the collapse at the end of 2016. A growth of 3.4% at the end of 2016 has been turned into an average 7% annually. When the Pandemic hit, government rolled out an extensive programme to protect lives and livelihoods, and to support businesses, spending billions of cedis (See 2021 Budget Statement and NPP’s 2020 Manifesto).

Even then, against the backdrop of global contraction, high debts and deficits, Ghana posted positive provisional growth of about half a percent (1.3% for non-oil), public debt of 69.71% to GDP, excluding the financial services sector bailout (76.08% including), and fiscal deficit of 11.7%. Without the bailout of the financial services sector (and others), our Debt-to-GDP ratio remains within market expectations (average of 59.7% in the four years from 2017). Economic activity, measured by the Composite Index of Economic Activity (CIEA), in real terms, increased significantly from 8.3% in December 2020 to 13.9% in January 2021, 4x what it was a year earlier in January 2020 (Bank of Ghana, March 2021).

That should count for something. Indeed, this IS the “something” it should tell us, not Sir. Sam’s. It would be interesting to understand why, in his entire analysis, he only once mentioned the Pandemic, and only in comparing it to road accidents. This omission does little justice to Sir. Sam’s pedigree as a global, savvy businessman and investor.

Fact 2: Investment Attractiveness

On Ghana as an attractive investment destination, Sir. Sam correctly notes that “investment promotion is like a beauty pageant. The reward goes to the country which is adjudged to be the most attractive as an investment destination,” and further, that “as an investor, I know what an economy should look like to attract the necessary investment for national development.”– Sir. Sam, Down The Up Escalator

Where we part ways is Sir. Sam’s foundation for his concerns as an investor. 

As I have already shown, the strong economy we built pre-Pandemic has enabled us to better withstand it, and Sir. Sam’s characterisation is at odds with the facts. 

But, just in case there is a secret sauce set of metrics Sir. Sam uses in analysing the investment potential for Ghana, it may be against the grain of common belief, and may even be swimming against the tide of evidence. 

At least over the last four years, other investors and analysts seem to be seeing differently. A precipitous decline of 42% in global Foreign Direct Investment (FDI) flows in 2020 missed Ghana by a mile as we registered a significant, 139% growth, from $1,109 million in 2019 to $2,651.00 million in 2020 (GIPC, Q4 2020 Report). 

The Global Investment Competitiveness Report 2017/2018, which captured the views of business executives of multinational corporations identified the following as critical factors affecting investment decisions in countries such as Ghana:

          Political Stability and Security: 50%

          Legal and Regulatory Environment: 40%

          Large Domestic Market

          Macroeconomic Stability and favourable Exchange Rate: 34%

          Available Talent and Skill of Labour: 28%

          Good Physical Infrastructure: 25%

          Low Tax Rates: 19%

          Low cost of Labour and Inputs: 18%

          Access to Land or Real Estate: 14%, and

          Financing in the domestic market: 11%

Ghana’s performance across a raft of global metrics measuring these expectations have been consistently positive. 

For example, after 28 Years of post-military coup democratic governance, five elected presidents, and three peaceful transfers of power between different political parties, there is no doubt that Ghana offers the political stability and security investors look for. This is reflected in its ranking as the 6th most democratic Sub-Saharan African state (EIU’s 2020 Democracy Index. It is also the 59th in the world, tied with Croatia) and 30th (out of 180) in the 2021 World Press Freedom Index.

Data from the World Bank’s Global Consumption Database (2017) show Ghana has the 8th largest ‘consumer opportunity’ in Africa, valued at about US$17.6 Billion and Ghana sits at the nexus of African trade as host of the Secretariat of the African Continental Free Trade Area (AfCFTA). With over 1.3 billion people and a GDP of about US$3.4 trillion, it is estimated that “if Africa were to increase its share of global trade from 2 to 3%, this one percentage point increase would generate approximately US$70 billion of additional income per annum for the continent.” Continentally, and Ghana is at the centre of it all, AfCFTA will deliver 33% in intra-Africa trade, US$16 billion in welfare gains, a 1 to 3% growth in GDP, 1.2% growth in jobs, and a 50% decline in Africa’s trade deficit (IBRD/WB 2020; WEF & Deloitte, 2021).

This is extremely important for current and future investors. In choosing Ghana as its Africa HQ, Twitter said, among other things, that: "Ghana’s recent appointment to host The Secretariat of the African Continental Free Trade Area aligns with our overarching goal to establish a presence in the region that will support our efforts to improve and tailor our service across Africa.”

If our attractiveness as an investment destination is in doubt in Sir. Sam’s perspective at this point, here are other factors that should give him and his fellow travellers additional comfort: 

 Ghana’s score on the 2021 A.T Kearney Global Services Location Index (GSLI) is 5.19, compared to South Africa’s of 4.60, and the United States at 5.97 

 Ghana improved three places, from 9th to 6th, in the RMB 2020 Investment Attractiveness Rankings, ahead of Nigeria, Cote d’Ivoire, Ethiopia, Mauritius, and Tunisia

 Ghana is the destination of choice for Foreign Direct Investments (FDI) in West Africa (UNCTAD 2019 World Investment Report)

          Investments in Ghana are safe and protected under a fair and ‘commercially-aware’ judicial system

(Ghana ranks 51st globally in the 2020 Rule of Law Index, out of 128 countries), and 

 From a rank of 13 out of 20 countries in the 2019 Absa Africa Financial Markets Index, Ghana improved to 6th (out of 23) in 2020. As the report indicates, Ghana is one of three countries that improved the most, the Pandemic notwithstanding.

These, among many other reasons, is why Google chose Ghana to build its first AI Lab in Africa, why Africa chose Ghana to host the AfCFTA Secretariat, and Twitter chose Ghana as its Africa HQ. It is also the reason several global brand automobile firms are lining up investments in Ghana, with Volkswagen and Sinotruk already in production.

Clearly, Ghana, beyond the economy, and by several other factors measured by these surveys, is an extremely attractive investment destination and reflects in the vote of confidence in the 2020 FDI flows.

On another note, while Sir. Sam advises us that “we really ought not to take comfort in comparing ourselves to the rest of Africa [and] that we must compare ourselves to the rest of the world,” he seems to have ignored all the above global indicators and how Ghana performs along them, choosing, instead, to reference the as yet unpublished KONFIDANT report, publication of the full report which has been postponed on a few occasions though an Executive Summary has been published (“Ghana's Competitive Potential in the AfCFTA.” Find a copy of the Executive Summary at http://www.konfidants.com/wpcontent/uploads/2021/04/Ghana-AfCFTA-Competitiveness-Report_2021_Konfidants_BUSAC.pdf).

But even then, Sir. Sam chose to focus on the relatively minor negative aspects of the Executive Summary and not the several, significant positives. For example, the executive summary indicates that Ghana, out of 54 African countries, has “generally impressive” Export Value Rankings in seven product categories: plastics, mineral oils, pharmaceuticals, metal manufactures, agro-processed goods, cosmetics, and textiles. 

By focusing on the negatives and not balancing it with the pointers for growth area, Sir. Sam unfortunately obscures the opportunities for Ghanaian exports within AfCFTA.

In any case, beyond the gaps indicated by the report, the 2021 UNCTAD Productive Capacities Index shows that Ghana’s productive capacity ranking improved from 143 in 2016 to 139 in 2018 while the World Bank indicates that Ghana is one of just five countries whose exports to AfCFTA partners will double or triple from the current baseline. And faster too. (IBRD/WB, 2020).

Surely, that is a more positive platform on which to market Ghana’s readiness for AfCFTA?

Fact 4: Supporting Indigenisation of High-Value Sectors

On indigenisation, Sir. Sam omits the significance of recent events, for example in the financial services industry when he simply repeats that a PwC report in 2019 says “only nine (9) out of 23 Class 1 licensed banks had majority local ownership with the rest being majority foreign-owned.” 

The public record cannot be any starker:  the Russian Roulette that principals of many indigenous banks were playing with depositor funds cost us over GH¢21 billion (about 4.6 percent of GDP) to clean up to date!

Furthermore, the nine indigenous banks that were closed were to a large extent absorbed by other indigenous Ghanaian banks – GCB and CBG – ensuring stronger Ghanaian ownership in the banking sector while GAT, an SPV with 100% Government of Ghana ownership, has also successfully invested in 4 indigenous banks to help them meet the new capital requirements. In the process, funds of 4.6 million depositors, investments of 81,700 people, and 10,000 jobs, which otherwise would have been lost were saved.

The “facts” as used in Sir. Sam’s reflections, is incomplete and unfortunately creates an inaccurate impression to domestic and international investors.

Fact 5: Punishing Corruption

I also disagree with Sir. Sam when he suggests that we are not fighting corruption, and in particular, not punishing corrupt public officials. 

Once again, I cannot, for reasons of time and space, repeat in full what the current government has done in fighting corruption. I will refer those interested to the 2020 NPP Manifesto.

However, I will like to draw Sir. Sam’s attention to the fact that forty (40)+ high profile individuals are facing charges over various corrupt acts in monetary terms totalling about US$265.5 million and GH¢2.225 billion, and that to date, six (6) have been found guilty, three (3) of whom have been jailed and ordered to refund US$3 million to the state. The other three (3) have been ordered to refund GH¢18.5 million and forfeit assets, including eight (8) buildings and five (5) luxurious vehicles to the state.

This, certainly, is inconsistent with his conclusion that “corrupt people, especially in high places will never face punishment.”

Looking Forward

There are many other subjects that Sir. Sam touched on which are deserving of review but I do not think any useful purpose would be served rehashing and “litigating” them.

I hope, however, that in this piece I have been able to properly contextualise some of the key issues he raised, and, hopefully, corrected some of the wrong impressions he may have inadvertently created.

I welcome other views on this matter so together, we can enrich the discourse. Ghana will be better for it.