Nearly a year ago, former president John Mahama set the otherwise dull pre-campaign season agog with his promise to transform Ghana’s development fortunes with a 24-hour economy (24HE) in his possible second term.  

Almost immediately, some critics dismissed the strategy as impractical, arguing that Ghana’s economy was too small to absorb any increase in output from 24-hour business operations. Mr. Mahama quieted them with the  disclosure that he would chair a special inter-sectoral team to accelerate exports and open up foreign markets for Ghanaian businesses. 

The critics then regrouped under the banner that Ghana already had a 24-hour economy, including some light-manufacturing firms, mining companies, pharmacies and hospitals, the police service, other government services, and chop bars (although the last is a rarity, even in big cities). Others argued that it is impossible to get all businesses to operate 24 hours. 

This, however, was a distortion of the strategy, originally proposed in Mr. Mahama’s 40-year National Development Plan. It’s about more than the handful of companies that currently operate around the clock, by default, not strategy.

The 24HE, by contrast, is a purposeful strategy to utilise as much idle productive capacity as possible while strengthening existing but under-utilised capacity across all businesses, irrespective of when they operate.  

Under the strategy, the majority of businesses, particularly SMEs, will continue to operate during the day.

They will receive special support to operate more efficiently, expand their operations, and create more jobs, resulting in higher profits, better wages, an expanded tax base, and more government revenue to finance development.

As of 2023, SMEs accounted for just over 90% of businesses in Ghana, about 80% of employment, and 40-50% of GDP, similar to their global averages. As with their counterparts elsewhere, including advanced economies, Ghana’s SMEs tend to have lower productivity (efficiency) than their bigger cousins do.

Under the 24HE, this deficiency will be addressed through an accelerated programme to boost SMEs’ productivity under a revitalised Local Economic Development (LED) programme, which will include a continuation of Mr. Mahama’s Markets Modernisation Programme and a wider modernisation of the informal economy.  

A Business Climate Survey (BCS) to guide wider policies for private sector development will also be introduced.

The minority of businesses that are expected to operate 24/7 at the upper end of the strategy will be “frontier firms,” which are, ideally, bigger and capable of investing and operating on a large scale and employing more people than a typical SME would. 

They also tend to have world-class management systems and are quick to adopt technology and promote innovation.

They account for a disproportionately bigger share of exports and government revenue and have the capacity to nurture SMEs and source materials from them for their operations. As a result, even though they may make up no more than 5% of all enterprises, these frontier firms will play a dynamic and an outsized role in the 24HE, promoting both backward and forward linkages, a major source of jobs.

It must be noted that “productivity” is not the same as “production” (output), so that while extending the number of hours a firm operates may increase its total production, it can only improve productivity by efficiently utilising all its productive assets, including labour, facilities, equipment, and time.

Output per worker/per hour worked (as productivity is technically measured) must therefore rise, or the inefficiencies will ultimately collapse the company, even if production is rising.

Government, too, must improve its productivity through comprehensive public sector reforms at the national and local levels.  A distinction must also be made between productive activities, such as manufacturing, and support services, such as port services or public safety, for purposes of effective policy-making.

The modernisation of agriculture and agro-processing forms another key feature of the 24HE. The entire value chain will be strengthened to boost food production through improved productivity (efficiency) and to supply the industrial sector with critical inputs, similar to Gen. Acheampong’s Operation Support Your Industry programme. 

From talk to action

Implementing the 24HE strategy will not be as easy as it appears in writing, especially given the deep economic crisis currently facing the country.  For example, investment in productive assets, such as factories, equipment, and infrastructure, is a precondition for economic growth. Yet, as shown in the graph below, such investment (as a share of GDP) has declined from a decade-high of 27.0% in 2015 to its lowest of 10.7% in 2023, according to the Ghana Statistical Service. Reversing this plunge will require a surge in investment, particularly, foreign direct investment, on an unprecedented scale.

Other critical inaugural initiatives would be:

• A legislative and policy agenda to set the parametres for the 24HE
• A drastic overhaul of fiscal and monetary policies to re-orient them towards employment-intensive growth, especially exports, which currently receive less than 1.0% of credit from banks, compared to nearly 7.0% for imports and 15.0% for “commerce and finance,” the largest.
• Emergency public sector reforms, with particular focus on SOEs, such as ECG, Ghana Water Company, and various infrastructure ministries, departments, and agencies.
• Accelerated TVET training in preparation for a surge in infrastructure development
• Restructuring of CSIR to drive Ghana’s scientific and industrial revolution
• Mobilisation of public support for the strategy

Nii Moi Thompson

The author was the DG of the National Development Planning Commission and author of the analysis for the 24HE for the Commission’s 40-Year National Development Plan.

Renowned economist, Dr. Nii Moi Thompson has criticised the Akufo-Addo administration for its handling of COVID-19 funds, alleging mismanagement.

Dr. Thompson highlighted that the COVID-19 pandemic unexpectedly bolstered the government’s financial position, noting significant financial gains for Ghana during this period. 

He pointed out that the International Monetary Fund (IMF) provided Ghana with a $1 billion grant without conditions due to the pandemic.

Speaking to Channel One TV on Wednesday, June 19, Dr. Thompson revealed that in 2021, Ghana received an additional $1 billion from the IMF, which was notably absent from the Auditor General’s report on COVID-19 expenditures, suggesting a potential oversight.

Dr. Moi Thompson further disclosed that Ghana received a total of GHC27 billion in COVID-19-related funds. 

However, he criticised the government for utilising only 42% of this amount for direct COVID-19 expenses, leaving a significant portion unaccounted for.

“We turn to look at COVID-19 purely in economic terms, but it was a financial bonanza for the government. You may recall that they actually even said that they exceeded the revenue targets in 2020, despite what everyone else thinks. Even though, revenue went down in certain sectors… the ICT, the telcos and others, they boomed.”

“But, as a result of COVID-19, the IMF also gave us a billion dollars in cash in 2020, pretty much, no conditions attached. The significance of that is that in 2015 when we went to the IMF, they pledged, I think, $940 million spread over three years,” he said.

“If your mother is dead but you say she is asleep, you are the one who will be hungry at dinner time.” – Ghanaian proverb.

The president’s claim in 2023 that the Ghanaian economy had “turned the corner” and that the future looked brighter than ever before appears to be at variance with data from his government and the reality on the ground. The economic crisis may be worse than what the president and his team are letting on.

They better face reality and act before it’s dinner time.  

Take, for example, the projected GDP growth rates for 2024-2027 that appear in Appendix 1C of the 2024 budget statement: They are almost identical across sub-sectors in a way that doesn’t reflect the economy’s historical growth patterns or the logic of economic analysis and forecasting.  For instance, the agriculture sector is projected to grow by 3.0% in 2024, the same as all its four sub-sectors – crops, livestock, forestry and logging, and fisheries; there is zero variation, despite their different structures and growth dynamics.  That is abnormal. (See the appendix below).

The lack of variation in growth rates in the industrial and services sectors is equally worrying.  A critical look at the comparative growth rates for the three broad sectors (agriculture, industry and services) from 2017 to 2023 suggests that the figures for 2024 might have been placeholders, or dummy data, that were not replaced with real data before the budget was released.  If so, every policy decision based on them would be equally wrong.  This will have serious implications for budget performance in 2024.  Something needs to be done to rectify it.

The projected growth rates from 2025 to 2027 are no better.  They are made up of exactly 4.2%, 4.7% and 5.0% across all the sub-sectors, except mining and quarrying (where planning and investment tend to be more professional and reliable).  Such identical growth rates across structurally different sectors are only possible in a perfect world of perfect knowledge of the future. Such a world does not exist.  The public deserves an explanation.

And then there are the Bank of Ghana’s latest statistics on Ghana’s public debt, as contained in its March 2024 edition of Summary of Economic and Financial Statistics.  The reported debt/GDP ratios from December 2022 to December 2023 are based, strangely, on fixed nominal monthly GDP of GH¢841.6 billion throughout 2023 (and GH¢614.3 billion for December 2022), despite high and rising inflation during that period. There are two problems here:  One, the Ghana Statistical Service produces only quarterly and yearly GDP data; never monthly.  And two, even if the Bank found a way to estimate monthly GDP (highly unlikely, even dubious), one expects nominal GDP to increase in line with rising inflation, even as real growth (or the underlying economy) is collapsing because of the high inflation.

This means that actual debt/GDP ratios may be lower than what was reported by the Bank, although total nominal debt, as contained in the Summary, increased from GH¢446.3 billion in December 2022 to GH¢610 billion December 2023, a growth of about 37.0%. A lower debt/GDP ratio, however, isn’t necessarily good news for the government, unless the economy is growing and creating jobs, which would lead to high corporate profits, increased household incomes, a larger tax base, and, hopefully, increased government revenue to finance development.  

That is not what is happening.  Indeed, data from the Bank on business credit, the oxygen of any economy, shows that businesses are gasping for air.  Credit to the private sector, adjusted for inflation, declined consistently from February 2023 to the beginning of 2024, averaging 18.8% decline per month, with the largest decline of 31.6% occurring in October 2023 (see the graph below).

A previous report by the Bank of Ghana had suggested that banks would rather invest in T-bills, the safest government investment available, after the chaotic domestic debt exchange rip-off, than extend loans to businesses that are at risk of collapsing under the weight of a repressive tax regime, raging inflation, a weakened currency, and a directionless policy environment.  

As if things aren’t bad enough, along comes a resurgence of dumsor with a vengeance (and a government in denial), the result of a steady decline in investment in the electricity sector since the last dumsor was resolved, as shown in the graph below.  Money from the Energy Sector Levy Act (ESLA), introduced by the Mahama government in 2015 to pay off debt in the sector and put it on a stronger footing to prevent future dumsor, has been squandered, and technical and financial losses from electricity distribution have increased from 23.3% in 2015 to 30% in 2022, instead of being reduced to 12% by 2021 and 5% by 2029, as recommended in the 40-Year Development Plan.

Worse, more than $11 billion in Eurobonds, amounting to over 74% of all Eurobonds since 2007 and borrowed in just four years, appears to have been also squandered, with no discernable positive impact on the economy.  Nor has the dramatic increase in petroleum revenue from GH¢200 million 2016 to GHc6 billion in 2022, or the $2 billion the IMF “dashed” Ghana in 2020 and 2021 to combat Covid-19, before the government went running back to the Fund in 2022 for a $3 billion bailout, after the economy bottomed out – despite all the previous resources and more.    

Is our mother dead or asleep?  

As the economy struggles through its worst crisis in living memory, Ghanaians have increasingly been calling for a long-term national development plan to guide the policies of successive governments and provide stability and resilience in economic growth. As a result, the “40-Year Development Plan,” which was once dismissed by critics as “too long” and a threat to political party manifestos, has gradually won favour among a restless public desperate for answers and relief. 

Perhaps, a little history would put the plan – and its fate – in perspective. 

The official name of what is popularly known as the 40-Year Development Plan was Black Star Rising: Long-term National Development Plan of Ghana – 2018-2057, spanning 40 years and culminating in the 100th anniversary of Ghana’s political independence from Britain.

It is common practice for nations to align their development plans with important dates in their lives.  Kwame Nkrumah’s Seven-Year Development Plan, for example, was originally five years but was extended to 1970 to coincide with the 10th anniversary of Ghana becoming a republic, having rejected the queen of England as head of state in 1960. His dream of using the occasion to showcase Ghana’s post-independence achievement, however, was dashed by the coup of 1966. 

In the case of the 40-Year Development Plan, there was an added element of fate: Under the 4th Republic, a new government inherits the last year of the preceding government’s four-year medium-term development plan (which overlaps with the year after every election) to foster continuity and also give the new government time to translate its manifesto into an implementable plan. Hence, no matter who won the 2016 election, the next medium-term development plan was going to start in 2018 (not 2017) and end in 2021, the year after the next election. Between 2018 and 2057, with or without a long-term plan, Ghana was going to prepare 10 4-year medium-term plans for a total of 40 years, accompanied by 10 presidential elections between 2020 and 2056 (See the table below).  The 40-year Development Plan only provided context, direction, and vision based on our collective fate. 

The preparation of the Plan by the National Development Planning Commission (NDPC) took over two years of comprehensive reviews of Ghana’s political and economic histories to understand how we evolved from independent, sometime-warring, states into a unified state fighting not each other but a common enemy of under-development. Besides reviews, the Commission also worked with six political parties to consult extensively around the country with a wide range of groups, including students, traditional leaders, business associations, religious leaders, and other civic organisations. Notable personalities, including the then-sitting president, John Mahama, two former presidents (J. J. Rawlings and J. A. Kufuor), the Speaker of Parliament, the Chief Justice, and the newly elected president, Nana Akufo-Addo, were also consulted. 

President Akufo-Addo’s pledge to be guided by the Plan, however, was soon undermined by hostile statements and ridiculed by some of his appointees. One decided to re-write the Plan, under a new name, “Ghana@100”, while another chose to replace it somehow with a “charter” called Ghana Beyond Aid. In the end, only fragments of the Plan found expression in an inchoate national development agenda. As a result, core initiatives were ignored and critical targets were missed. For example, the Plan recommended a reduction in electricity distribution losses from 24% to 12% by 2021 and further to 5% by 2029. Instead, losses increased to 29.7% in 2021 and have almost certainly increased significantly since then.  Similarly, the target of increasing electricity consumption per capita, a key indicator of economic growth, from 348 kWh per capita to 850 kWh per capita by 2021 fell short by 302 kWh per capita and has been declining, worsened by the current challenges in the electricity sector.   

Recently, the Planning Commission commenced a process to revise the plan to reflect changed circumstances since 2018, a commendable idea. However, it wants to change the name (yet again) to “Long-term National Development Perspective Framework,” to be “popularly referred to as Vision 2057”.  This is regrettable because the choice of name for the Plan was discussed extensively at the time of its preparation and reported cogently in the Plan as follows: 

“All long-term plans are inherently frameworks (or vision documents) that guide the preparation and implementation of operational plans, both medium and short term. In popular usage, however, and for effective communication, the word “plan” is often used interchangeably with “framework” or “vision”. In 2011, Parliament passed the Petroleum Revenue Management Act, (Act 815). Aspects of this law refer to a “long-term plan” [to be developed] for Ghana. What is being prepared, though called a “plan”, will be a framework or vision document to guide successive governments in the preparation of their medium-term plans between 2018 and 2057.”  In other words, the 40-Year Development Plan is essentially a framework to guide medium-term planning.  Why the duplication?

It has taken the public nearly 10 years to get used to the name, “40-Year Development Plan.” What value is to be gained by suddenly changing it to something entirely different, even confusing, when there are more pressing issues facing the Plan, like the various missed targets and the imperative to redress those issues expeditiously? 

What is in a name, when we have a distressed economy to rebuild?   

*****

The author was the director-general of the National Development Planning Commission when the 40-Year Development Plan was prepared.

Don’t mind the prophets of doom, who say, “a 24-hour economy is impossible.” It is possible! We are, after all, Nkrumah’s children: Yente gyai – “we don’t hear stop”. We just need to know what a 24-hour economy is and is not, and what its main drivers should be. And off we go!

For starters, a 24-hour economy is NOT the same as a night-time economy, which is part of the 24 hours. And no matter how big a 24-hour economy might be, the bulk of its main business activities and job creation will take place in the day-time economy, including the weekends, with night-time extensions playing a supplementary but crucial role.

In the world’s largest 24-hour economy (the United States), for example, only 27% of the labour force work nights. Yet, together, the day and night economies make a “dynamic duo,” creating perhaps the world’s most flexible formal labour market and giving both workers and job seekers, including students, virtually limitless options to choose from. Powered by this combo, America’s GDP, the biggest in the world at $25.6 trillion, is larger than that of the 27-country Euro area, which has a bigger population but not much of a 24-hour economy.

Building a 24-hour economy thus does not mean the end of the day-time economy (or chop bars at dawn). It only means the purposeful expansion of industrial activities, such as manufacturing and allied services like trucking, as well as high-value technical services like ICT, architectural services, and financial services, beyond the day into the night to meet rising domestic and international demand. In the US, for instance, some banks provide regular banking services in the day and process passport applications and other services for the Federal government overnight.

Exclusively night-time economies, mainly of the entertainment kind, are favoured by cities to complement other day-time activities (industrial or services) and to promote tourism in particular. These too have their place, especially for local governments, in a 24-hour economy for a country like Ghana, where tourism strategy is built around the narrow legacy of slavery and a few poorly organised festivals (and lately even funerals, a crazy idea). A more diversified tourism strategy, supported by a modern and globally competitive hospitality and travel industry, is needed to support a 24-hour economy across Ghana, not just Accra.

Nor is a 24-hour economy about haphazard financial handouts to businesses by government, which is broke anyway and will be for a long time. In the past, funds meant for “distressed businesses” were misused by unscrupulous beneficiaries, some of whom bought homes abroad with the funds. Another “entrepreneur” reportedly donated 10% of a subsidised loan to a church as tithe before spending even a pesewa on her business.

Government assistance to businesses in the building of a 24-hour economy must, therefore, be a prudent mix of the financial and non-financial, with objective and rigorous criteria for selecting beneficiaries. The best strategy, however, remains a Conducive Conditions Strategy (CCS), which emphasises reliable utility and other (public) services to allow the greatest number of entrepreneurs to rise and to thrive on their own anywhere in the country without government handouts.

Overall, the most effective strategy for creating a 24-hour economy must be informed by Ghana’s recent economic history, its collective aspiration to become a high-income country by 2057 (as outlined in the 40-Year Plan), and the need to build economic and institutional resilience in a global economy that is in perpetual turmoil.

The 11 factors listed below as the key drivers for a 24-hour economy must therefore be supported by simultaneous policies for social development (such as education and training); environmental development (such as spatial planning and the preservation of the natural environment); and institutional development (such as better public safety, effective decentralisation, and a credible assault on public sector corruption).

1. Electricity: Abundant, reliable, and affordable electricity is the lifeblood of a 24-hour economy. Sadly, the government has missed critical targets for electricity use as the driver of economic growth in the past seven years and is unlikely to overcome that any time soon. Fortunately, the 40-Year Plan contains policies and strategies that can help close the gap substantially, if not completely. But extensive governance reforms in the broader energy sector will be required. For example, the CEOs for ECG, GRIDCO, and VRA must be hired professionally, not appointed politically, and signed to performance contracts to deliver or be fired. Better to displease three people than to disappoint 33 million Ghanaians.

2. Infrastructure and Logistics: Goods and services once produced (largely as a result of available and stable electricity) must be transported and distributed efficiently to consumers, at home and abroad, through physical and virtual infrastructure, governed by appropriate systems and regulations (logistics). The decline of Ghana’s physical infrastructure over decades makes this task daunting. A typical cargo truck in Ghana, for instance, crawls at only 18 mph, instead of the optimal 55mph, which partly accounts for Ghana’s weak global competitiveness. But, as with the shortfall in electricity use, there are solutions: strategic short-term interventions can mitigate these challenges enough to facilitate the beginnings for a 24-hour economy, while medium- to long-term solutions are pursued.

3. Exports: Without an aggressive export development agenda, a 24-hour economy is doomed to fail. Local demand, even in large-population countries, is never enough to sustain a 24-hour economy, which explains why, for instance, the US Trade Representative operates from the White House, where the president can use his power to open up markets for US exporters. Every $1 billion in US merchandise exports creates 6,000 new American jobs, while $1 billion in service exports (such as tourism, music, movies, and education) creates 4,500 new ones. Ghana’s export policies and strategy, by contrast, have been weak, plagued by inconsistencies, crass politicisation, and corruption. This is a threat to a 24-hour economy.

4. Local Economic Development (LED): The national economy is the sum of all local economies. To grow the national economy thus requires purposeful growth of local economies. Yet, this obvious truth has for years been lost on policymakers, who disproportionately direct national development resources to Accra, to the neglect of the rest of the country (Over 85% of foreign direct investment, for instance, goes to Greater Accra Region alone (mainly Accra and Tema), while nearly 70% of all finished goods in Ghana are produced in the region). The result is a region/city operating beyond its capacity and choking on its inefficiencies. For a 24-hour economy to be beneficial to all Ghanaians, growth opportunities must be created nationwide through LED.

5. Small and Medium-Scale Enterprises (SMEs): A focus on SMEs should not mean a neglect of large firms. Both will play critical roles in a 24-hour economy. But their needs and capabilities differ. For instance, while large firms can afford to hire lawyers and accountants to navigate government red tape, such services come at a great and often unaffordable cost to SMEs. SMEs also face a much bigger challenge in acquiring skills (hard and soft; as well as managerial and professional); entering foreign markets; and accessing just finance, as they’re subjected to punitive interest rates by lenders. Government support for SMEs in Ghana also tends to be unduly centralised and fragmented, undermining the constitutional role of district assemblies to lead the economic development of their communities. Chiefs in particular should champion the case of LED under a 24-hour economy.

6. Employment Act: Originally proposed in the NDC’s 2020 Manifesto (the first of its kind in Ghana), an employment act will serve two purposes: (1) Provide the legal framework for policies to create jobs in a 24-hour economy, and (2) fill a void left by the current Labour Act, which focuses primarily on conditions of work and not opportunities for work. The new Act should also facilitate the formalisation of the Ghanaian economy by guiding policy away from vulnerable employment to secure or wage employment, which is associated with decent work and poverty eradication.

7. Markets Modernisation: Markets constitute the core of Ghana’s retail economy, and in many districts, they (along with their associated lorry parks and petty traders) are the main sources of local revenue. They also constitute the critical link between what will be produced in a 24-hour economy and how to get them to consumers (wholesaling and retailing). They tend, however, to be chaotic, inefficient, and bedevilled by sanitation challenges, despite the fact that traders pay daily tolls to their assemblies. Fortunately, former president John Mahama has a head start on this, with his transformation and modernisation of the Kumasi Central Market. He has promised to expand his Market Modernisation Programme to the rest of the country if re-elected. It should form a major building block of the 24-hour economy he has proposed.

8. Civil Service Modernisation: There can be no productive private sector, least of all for a functioning 24-hour economy, without a civil service that is efficient and responsive to the needs of businesses. The disconnect between the two has been the bane of Ghana’s economic growth and transformation over decades. In the take-off phase of a 24-hour economy, targeted reforms in the civil service to facilitate the various catalytic initiatives from the government will be required – at the national and sub-national levels.

9. Agricultural Modernisation: Agricultural policy should focus on efficiency, which increases productivity (farmers using less inputs or better techniques to produce more), with the objective of increasing output (for food self-sufficiency and industrial inputs), raising rural incomes, and reducing rural poverty. This means government, among other things, providing critical support services, including extension services, in a fair, transparent and efficient manner. For the youth, employment-creation opportunities should focus on “secondary agriculture,” or agro-processing, which has a greater potential for growth to meet both domestic and external demand and create the kind of high-paying jobs that are not readily available in “primary agriculture”.

10. Stronger economic policy framework: The framework for economic policy-making in Ghana has always been fragmented and ill-focused, with disproportionate attention to macroeconomic policies (fiscal and monetary), and very weak, sometimes even counter-productive, links to sector policies, which directly drive economic growth and create jobs. The current obsession with a deficit- and debt-GDP ratios and misguided efforts by the Bank of Ghana to fight inflation by needlessly punishing businesses with killer interest rates is a classic case of a disconnect between macroeconomic policies and sectoral policies, which in turn must be shaped by sound development planning. A 24-hour economy will require a revolution in economic thinking and policy-making, including planning, implementation, and monitoring.

11. A productivity revolution: The 40-Year Plan proposed a “Productivity Development Strategy” as one of 13 catalytic initiatives to unleash the creative and entrepreneurial spirits of Ghanaians. Nothing became of it. It is not too late to apply Sankofa principles, mindful of the fact that without purposeful growth in productivity, none of the drivers discussed above would be fully effective, much less sustainable. As a recent World Bank report said, productivity is the single biggest determinant of differences between rich and poor countries, a fact which has gained greater global attention since COVID-19. We ignore it at our own peril.

“What others have done, we can do.” – Marcus Garvey

On 6th October 2023, a delegation from the International Monetary Fund (IMF) held a press conference in Accra after a two-week review of Ghana’s $3 billion IMF programme that was initiated in May with a $600 million down payment from the Fund.

Present at the conference was a chastened finance minister, Ken Ofori-Atta, who had had to swallow his pride and request aid after invoking the Bible to swear that Ghana would never go to the Fund because “we are a proud nation.”

He said little of substance at the press conference, even when he appeared to read his answers to journalists’ questions from a cheat sheet.

Also present was the Governor of the Bank of Ghana, Ernest Addison, who read out a brief statement and for the most part remained quiet.

Perhaps, the most legitimate question of the day, asked by Bloomberg’s Ekow Moses, about the lack of resilience in Ghana’s economy despite claims of “robust” growth by the Fund, was cheekily rubbished by Information Minister Kojo Oppong-Nkrumah, who MCeed the occasion. This provided the finance minister with the cover to dodge the question.

After the conference, the Fund issued a statement that waxed lyrical about the “authorities’ strong policy and reform commitment,” improvement in the “fiscal and external position,” and what it called “signs of economic stabilization”, among many other platitudes that the Fund is known for.

However, data from the Ghana Statistical Service easily confirm Mr Moses’s fears: an economy in distress, with its industrial core in meltdown mode, potentially resulting in growing joblessness, poverty, and long-term loss of government revenue, all of which threaten the viability and sustainability of the Fund’s programme.

For example, apart from the mining and quarrying sector, which expanded by 3.5%, overall industrial production declined by nearly 2% in the second quarter of 2023, with the following sub-sectors driving the decline (year-on-year): construction (-11.7%); electricity (-5.1%); water supply, sewerage, waste management, and remediation activities (-3.3%); and manufacturing (-0.5%). In the services sector, “trade, repair of vehicles, and household goods” shrank by -5.3%, while in agriculture, “forestry and logging” declined by -4.2%.

The first quarter was worse, with a decline of 3.2% in the broad industrial sector, mainly water and sanitation, construction, and manufacturing. This means the first six months of 2023 were an industrial disaster for Ghana, and a setback for broader economic transformation.

Why is the industrial core of the Ghanaian economy imploding when it should be flowering under the Fund’s seemingly successful programme? There are many plausible explanations. Bank of Ghana data, for example, show that between December 2022 and August 2023, business credit, the oxygen for economic growth, declined at a year-on-year average of 16.4%, after adjusting for inflation.

The Bank’s two-faced policy of recklessly printing money for the government, which fuelled inflation, and then raising interest rates to fight the same inflation, appeared to have hurt businesses and consumers and left inflation largely intact.

Between January 31, 2022 and September 25, 2023, the Bank increased its policy (interest) rate steadily from 14.5% to 30.0%. The only “benefit” of this doubling of the rate was the dubious distinction of Ghana having the second highest interest rate in Africa, after Zimbabwe, and the third-highest inflation on the continent, after Sierra Leone and Sudan, further proof that the simplistic use of interest rates to fight inflation in Ghana has always been counterproductive.

Despite this obvious failure, the BoG governor pledged at the press conference to do more of the same! Another culprit of the imploding economy is the government’s yet again reckless imposition of new and higher taxes under duress from the Fund.

This inevitably choked off business activities and consumer spending, worsening a crisis that started almost as soon as the government took office in 2017.

No, it’s not Covid or Ukraine

The government, with the support of the IMF, has been blaming COVID-19 (and, to a limited extent, the Ukraine war) for Ghana’s economic woes, as if Ghana was the only country affected by the pandemic. Other countries, equally affected, sometimes worse, have moved on, with many even prospering.

Why not Ghana? Because, as noted above, Ghana’s economic decline began long before the world even heard of Covid, thanks to a lethal combination of vindictive and haphazard policies, facilitated by a pervasive culture of incompetence, arrogance, corruption, and a fake religiosity that saw millions in public funds criminally diverted towards the construction of a cathedral instead of much-needed economic infrastructure.

For example, quarterly growth in electricity use, a key indicator of industrial and broad economic activity, peaked at 20% in the first quarter of 2018 and slowed to 0.09% by the third quarter of 2019, whilst manufacturing growth slowed from 13.8% in the second quarter of 2017 to 6.3% in quarter four of 2019.

After the government froze payments to “certain” contractors, the construction sector, dominated by the government, began to slow from 7.6% in the second quarter of 2017, until it went into negative territory in the second quarter of 2019, resulting in an outright decline of 4.4% for 2019.

The overall economy dealt a body blow from the botched reforms of the financial sector, which posted an average negative growth of 7.3% from 2017 to 2019, worsened in part by mounting loan defaults by contractors owed by the government.

Indeed, in November 2019, five months before Covid (and over two years before Ukraine), when the finance minister presented the 2020 budget to Parliament, he predicted that GDP growth would decline from 8.1% in 2017 to as low as 4.6% in 2022, contradicting the government’s manifesto pledge of growing the economy by “double-digit” over four years. This was an economy in meltdown mode before COVID-19 or Ukraine.

If anything, Covid was a financial bonanza for the government. In 2020, the IMF gave Ghana $1 billion to combat Covid. Eventually, Ghana lost 1,461 of its citizens to the pandemic, the 22nd largest loss in Africa, implying about $685,000 per Covid death. By contrast, South Africa, with the largest COVID deaths in Africa – 102,595 – received from the Fund about $42,000 per death, or 6% of Ghana’s. (As of September 2023, the policy rate for South Africa was 8.25%, with an inflation rate of 5.4%, compared to Ghana’s 30% policy rate and 38% inflation).

In 2021, the Fund gave Ghana another $1 billion for economic recovery from COVID-19, a figure that somehow was omitted from the Auditor General’s December 2022 report on COVID-19 expenditures.

The report nevertheless stated that the government eventually raised GH¢21,844,189,185 in the name of COVID-19, which included additional contributions from the World Bank, the European Union, the African Development Bank, and the Bank of Ghana, among others. But the government spent GH¢11,750,683,059 (about 54% of the total, much of it siphoned by the procurement mafia) on Covid and diverted the rest into what it called “budget support”. Shockingly, in 2021, it imposed the COVID-19 Health Recovery Levy as part of punitive measures against an already ailing economy in need of tax relief.

Nor was Covid the only source of financial bonanza for the government. Between 2018 and 2021, it raised over $11 billion in Eurobonds, almost three times the $4.5 billion successive governments raised between 2007 and 2016, or 71% of all Eurobonds since 2007. There was also spectacular growth in oil revenue from GH¢218 million in 2016 to GH¢6.billion in 2022.

Clearly, the government’s problem is not lack of money – or the threat of a budget or trade deficit. It is a corrosive leadership deficit and the pig-headed policies thereof. Unless the Fund and the government confront this inconvenient truth and act accordingly – rather than whitewashing statistics – the economy’s implosion will continue and the Promised Land that the finance minister offered Ghanaians when he haughtily rejected IMF aid will continue to remain a costly illusion.

The writer is a former DG of the National Development Planning Commission and was the author of the “Conceptual Framework for Building Economic Resilience During and After Covid-19,” prepared for the UN’s Economic Commissions in Africa, Asia and the Pacific, West Asia, and Latin America and the Caribbean (2020).

There is currently no room for rhetorics when it comes to salvaging the woes of the country’s currency, according to a former Director-General of the National Development Planning Commission (NDPC).

Dr Nii Moi Thompson believes verbal analyses usually spiced with political inclinations will not do much to restore the speedy rate of depreciation being experienced by the cedi.

“It is clear that the cedi’s woes cannot be addressed successfully with flawed and politicised analyses, or through public lectures full of sound and fury that signify nothing,” he said in an article.

As of Monday, March 21, 2022, the rate of exchange of the local currency was ¢7.28 to US$1, a situation many Ghanaians lament is worsening the cost of doing business by the day.

He said the only solutions are in actual steps and not mere political lecturers.

Some of the avenues to restore the cedi’s strength included a “sober reflection, a clear vision of the cedi’s and the economy’s future, sound policies, and disciplined action, all of which will certainly transcend governments.”

Dr Thompson made these comments in an article enumerating the country’s exchange rate situation and how to surmount the existing challenges.

He also advised against extravagant foreign travels by government officials including the President and advocated cuts in general foreign expenditure.

“In the immediate term, as the crisis rages on, the government must begin as a matter of urgency by curbing frivolous spending, especially spending that is likely to weaken the cedi further.

“This includes the importation or purchase of luxury vehicles; a reduction in foreign travels by public officials (if they could do it at the height of Covid, they can do it now); an end to the President’s extravagant lifestyle and those of his appointees generally; an end to endless foreign “medical reviews” for public officials, including MPs; and any other spending that puts needless pressure on the cedi,” he added.

On March 4, 2022, the Bank of Ghana reported that the cedi had reached 7.00 to the dollar. Compared to the rate of ¢4.2 at the end of December 2016, this meant the cedi had depreciated by 40.02% against the dollar since January 2017, when the government took office amidst flamboyant promises to usher the cedi into a golden age of stability.

In mid-2017, the vice president, Dr Mahamudu Bawumia, who now chairs the economic management team and had been hailed as the ultimate saviour of the long-suffering cedi, proudly declared that he had “arrested the cedi” (or its “rate of depreciation”?), locked it up, and given the key to the IGP.

Since then, there appears to have been a jailbreak, and the IGP must answer some questions.

As to be expected, the rates at forex bureaus were higher than the BoG’s rate, with one bureau quoting US$/¢7.6 on the same day; it was likely higher still at Cow Lane, the engine room of the underground currency market in Accra.

Clearly, unless drastic action is taken – and soon – the cedi may well reach the 10:1 mark before year’s end, dragging with it the already-struggling economy. We can’t afford that.

How did things go so horribly wrong between 2017 and now? What happened to those flamboyant promises and the vice president’s smoke-and-mirrors lectures on the cedi, complete with insults for anyone who dared disagree with him? And how do we get the cedi out of this quicksand and back on firm ground to prevent the imminent implosion of the economy?

To answer these questions, we need first to revisit an article that the vice president wrote on his Facebook page in 2018 when the cedi started wobbling; briefly look at the cedi’s beleaguered history; and then review the key recommendations of the 40-Year Development Plan (2018-2057) to stabilise the cedi that the government ignored in favour of a special committee in 2020 to “investigate the depreciation of the cedi”. That committee almost immediately faded into oblivion and left the cedi to its fate.

The vice president began his article with his trademark insults, noting that former President Mahama, who as vice president before becoming president once chaired the economic management team, had been talking about exchange rate depreciation, but “sadly demonstrate[d] his lack of understanding on (sic) key aspects of our economy”. He then promised, “to try to simplify the explanation for him”. Rather condescending.

What followed was a potent mix of crass propaganda, grammatical blunders, and a shocking inability of the vice president to calculate the depreciation of the cedi, or, worse still, distinguish between currency depreciation and appreciation. He was, of course, once the deputy governor of the Bank of Ghana, which is responsible for managing the stability of the cedi.

The propaganda had begun in the months leading to the 2016 elections. He and the entire campaign team behind him proclaimed, erroneously, repeatedly, that the cedi had depreciated by 247% under “NDC’s Mills-Mahama (8 years)”, from GH¢1.2 to ¢4.2, compared to what he claimed to be a depreciation of 72% under “NPP’s Kufour-Aliu (sic) (8 years)”. These claims were reproduced in his Facebook article.

Since nothing can lose all its value and remain in existence, it is impossible for a currency too to lose 100% or more of its value without ceasing to exist. Even if the cedi were to exchange for a million to the dollar, so long as it can buy something, it can’t be said to have lost 100% of its value. This is basic financial economics.

What the vice president presented as the depreciation rates of the cedi against the dollar under the two governments, therefore, were in fact the appreciation rates of the dollar against the cedi (something, after all, can be worth several times its value). The correct depreciation under the Kufuor-Aliu Mahama government was thus 41.7%, and not 72%, which was actually the appreciation of the dollar against the cedi. And the Mills-Mahama depreciation rate was 71.4%, still unacceptably high, but certainly not 247%, which was the dollar’s appreciation against the cedi (the exact figure is 250%, allowing for the decimal places that he omitted).

He concluded: “Although it is early days, there is much optimism for a more stronger (sic) currency under the leadership of Nana Addo Dankwa Akufo-Addo”, continuing with his habit of brown-nosing.

What he didn’t say was the role of Eurobond proceeds in the relative stability of the cedi under his watch up to that point. The Bank of Ghana had reported in May 2018 that “the recently issued Eurobonds raised the levels of international reserves to US$8.1 billion (4.4 months cover for imports) as at 17th May 2018, providing enough cushion against any potential external vulnerability” – that is, cedi deprecation, in layman’s language. It was when the Eurobond proceeds ran out and the cedi started tumbling that the former president spoke and incurred the wrath of the vice president. He had been exposed over his famous claim that the exchange rate would always expose weak economic fundamentals. Clearly, he didn’t like that.

Between 2018 and 2021, the government borrowed an eye-popping US$11 billion through Eurobonds, compared to US$4.5 billion under Mills and Mahama; the US$11 billion represented 71% of all Eurobonds since President Kufuor. By early 2022, investors had seen through the government’s Ponzi scheme and pulled the brakes on further lending. The scheme collapsed and the cedi has been disintegrating since then. The vice president has been in hiding. Or at least quiet about the cedi.

Now, to the demons that have plagued the cedi for decades. Busia was overthrown in 1972 for devaluing the cedi, and subsequent military governments used takashie to keep it artificially stable and strong, even as inflation ate deep into its value. The Economic Recovery Programme of 1983 let the cedi float on the open market, with the establishment of forex bureaus, for example. But with a weak production base, disproportionately high dependence on cocoa proceeds to finance imports, and chronically low productivity, the cedi continued to melt in value. By 2007, it was exchanging at 9,300 to the US dollar, up from 2.75 cedis in 1982.

In July 2007, the government redenominated the cedi by knocking off four decimal places. Overnight, it took 93 pesewas, instead of ¢9,300, to buy one US dollar. But it was all an illusion. Whatever cost ¢9,300 previously simply cost 93 pesewas afterwards. The substantive value was the same, and the cedi remained inherently weak against the dollar. Indeed, it lost 0.16% of its value against the dollar in July, the month of redenomination, and continued to lose its value every month until August 2009, stabilised for about a year, and resumed its losing streak again, with a few exceptions here and there.

Following the redenomination, one cedi could get you US$1.08 in 2007. As of December 2021, the same cedi could get you only about 17 US cents, a cumulative loss of 84.5% in value. This was down to 14 cents as of March 4th and could fall below 10 cents by year’s end if nothing is done by the government. The president has openly said that he is “extremely upset and anxious” about the sinking cedi, but he has not said how he would rescue it.

– (-)

The 40-year Development Plan (2018-2057), prepared by the National Development Planning Commission from two years of rigorous analysis of Ghana’s economy dating back to colonial times, identified three main sources of the cedi’s persistent weakness and made corresponding recommendations for immediate action, starting from 2018.

The first was about the psychology of currency markets. Every time government in particular quotes prices or does local business in dollars (such as granting loans to MPs in dollars, in violation of the law), it talks down the cedi, effectively telling the public that the national currency is so worthless that even the government doesn’t believe in it. The public, especially importers, internalises these talkdowns and acts upon them, putting the cedi in a loop of expected depreciation-actual depreciation and back to more expected depreciation. Solution: The Bank of Ghana must enforce the law against doing local business in dollars and other foreign currencies. The minister of finance, in particular, should know better not to break that law.

The second source is somewhat related to the first but is largely institutional, such as the violation of laws governing the sale of dollars and other currencies by private individuals or forex bureaus, and the dollarisation of port or border services, especially. Why make laws if you won’t enforce them? The dollarisation of port services, in particular, contributes greatly to what has become a perpetual depreciation of the cedi. Solution: Enforce the law, and in the case of port services, charge all fees in cedis, at fixed rates to be revised only periodically to reflect inflation. Anything less will drag the currency further into the pits of hell, and one cedi may soon be worth less than one US cent.

The third and major structural source of the cedi’s age-old woes is a weak and narrow export base that simply doesn’t generate enough forex earnings. On paper, exports of gold and crude oil (the two main traditional exports, besides cocoa) may grow but very little of the proceeds actually end up in our international reserves due to an ownership structure that favours foreign investors. The situation is similar to non-traditional exports, where most of the proceeds also go to the foreign companies that produce most of them.

The Ghanaian economy, therefore, essentially remains a mono-crop economy, depending almost entirely on cocoa, which is wholly Ghanaian owned. But cocoa proceeds are seasonal, surging from October every year and peaking between the first and second quarters of the following year, which coincides with the time of the year when foreign companies begin to repatriate their cedi profits from the previous year in dollars. The cedi is thus perpetually under pressure from the dollar.

To help address this structural imbalance, the Plan proposed “strategic exports” in addition to traditional and non-traditional exports. These would be high-value goods and services with most, if not all, of the proceeds coming back to Ghana. For example, Total, a French company, has fuel stations throughout Ghana, which together produce millions of cedis in profits that are shipped out in dollars annually. Why doesn’t Goil, a Ghanaian company, also have branches throughout France and other countries from where it, too, would ship back dollars every year to help support the cedi? We also have IT, financial, architectural, and other professional and technical services that can bring in more dollars through their exports. The venturing of GN Bank into foreign markets, for example, could have helped offset the effect of the dollars repatriated by foreign banks in Ghana from their cedi profits. In short, the Plan called for a programme for product and market diversification alongside a strategy for economy-wide productivity improvements and development.

It also identified a group of state-owned enterprises (SOEs) that together can bring in more foreign exchange than gold and oil combined. This, however, would require comprehensive governance reforms of those SOEs. Government’s influence on them, for instance, would have to be restricted to the appointment of board members with relevant (and vetted) expertise in the SOEs’ sectors of business. There should also be special slots for private individuals with relevant experience to apply for consideration. The board would then hire the top management through internationally competitive recruitment processes. The nationality of the best candidates shouldn’t matter; their ability to deliver should, be mindful that some of the largest and most successful companies in the world today are run by non-nationals who were found to be the most qualified.

Provision, however, should be made for skills and knowledge transfer to Ghanaians, where foreign nationals are hired, as part of a broader strategy to build the capacity of Ghanaians to manage those SOEs – and foreign firms, if need be – in the future.

From the above, it is clear that the cedi’s woes cannot be addressed successfully with flawed and politicised analyses, or through public lectures full of sound and fury that signify nothing. Addressing those woes will, instead, require sober reflection, a clear vision of the cedi’s and the economy’s future, sound policies, and disciplined action, all of which will certainly transcend governments.

In the immediate term, as the crisis rages on, the government must begin as a matter of urgency by curbing frivolous spending, especially spending that is likely to weaken the cedi further. This includes the importation or purchase of luxury vehicles; a reduction in foreign travels by public officials (if they could do it at the height of Covid, they can do it now); an end to the president’s extravagant lifestyle and those of his appointees generally; an end to endless foreign “medical reviews” for public officials, including MPs; and any other spending that puts needless pressure on the cedi.

We can’t eat our koosé and have it too. Something has to give.

March 6, 2022

“What others have done, we can do.” – Marcus Garvey.

*****

The writer, Nii Moi Thompson, is the former Director-General of the National Development Planning Commission