11 Aug The Ghanaian economy will still see growth in 2020, despite Covid-19
Interview with Honourable Kojo Oppong Nkrumah, Minister for Information, Ghana
BF: Ghana’s economy was growing at full pace before the emergence of Covid-19. 2019’s growth in gross domestic product (GDP) surpassed 7% and forecasts from international financial institutions predicted similar growth for this year, while employment and job creation have been major priorities of this administration. As global economies adapt to the devastating consequences of the pandemic, uncertainty is a major issue. How would you evaluate the consequences for Ghana and what kind of programs is the government implementing to reduce the impact of the pandemic?
KON: Let me give a bit of a background. When this administration assumed power, growth had dwindled to about 3.4% per annum at the end of 2016. This was down from about 14% in 2011, which was the last illustration of our traditional economic activity. For those who have studied political and economic history, when the president before our current one left office, he had left oil. He left the discovery of oil, which had boosted productivity to about 14% in 2011. By the time our government was reassuming the reins of power in 2017 that had fallen to around 3.4%. The president and his economic management team came up with a strategy to fiscally consolidate qualitatively, but to invest a lot of resources in what we call the productive sectors of the economy. Our strategy was to have growth that comes with jobs; so widespread growth across about 20 different sectors of the Ghanaian economy. That provides jobs, which provides income and a better quality of life for people.
You are right in saying that Covid-19 has hit us. Our annual growth in GDP was about 7% as of 2019 and we are averaging around 6.5% in the medium term. Globally, coronavirus has caused a contraction of economies, but the Ghanaian economy will still see growth in 2020, despite Covid-19. Unfortunately, however, it will not grow at the same average medium-term growth rate but it will increase by about 1%.
What that means is that the level of jobs that we were expecting to come with the growth pattern that we have been seeing during this administration will not be achieved this year. Job numbers in the country have been growing by up to 100,000 a year due to a particular government employment initiative called the Nation Builders Corps (NABCO) programme through the public sector and then the private sector. This year, the level of growth and employment that we were expecting will be curtailed. It won’t be a regression but it will be a curtailment.
To reduce the impact of the pandemic, the president has introduced a law of social mitigation measures, so that businesses can hold on to their staff as a first point. In terms of statutory obligations, we have extended some of the timelines for filing tax returns and so on, so that you have more time to organise yourself and service those statutory obligations. Therefore, you are not forced begin to cut down on employee numbers as a result of those obligations.
For specific sectors of the economy, we have introduced a stimulus program. If you take what we call micro-enterprises, we have provided about a billion Ghana cedis (£133 million) worth of credit, part of which ostensibly may go to grants. These are small enterprises that you would see on the high street if you were in the UK – family-run shops that were suffering because of lockdowns. We have money aimed at keeping them in business and giving them a lifeline so that they don’t have to lay off workers.
We have also introduced a 2-billion-cedis credit line for small-scale enterprises. We are working with financial institutions so they can provide credit as well, which these businesses can use to sustain their staff numbers until things begin to turn a curve for Covid-19. The structure is such that, for the first year you have a moratorium and for the second year onward you begin to contribute. So, you can hold on to your staff and after you are getting back on track, you can reorganise your finances and begin to pay back some of these credit lines.
We are also in the process of introducing unemployment insurance. Employees who have lost their jobs have an opportunity to tap into this and still get an income, so that their employers don’t have to bear the full brunt in the event that they get laid off. When it comes to unemployment, there are two factors. What Covid-19 has done is stop us from growing jobs at the same rate as we were, but we are trying to avoid a situation where there will be massive layoffs as well. That has been the threat and a combination of these measures that I have just spoken about is addressing this.
BF: Ghana has enjoyed high levels of foreign direct investment (FDI) over recent years. While the FDI inflow has experienced some reduction in absolute terms from 2017 to 2019, the number of greenfield investments grew by a third between 2018 and 2019. What strategy is your government putting into place to raise these figures and what impact will the pandemic have on the numbers?
KON: I would like to talk about two things. One is that we had a clear strategy from 2017, when this administration assumed the reins of power, to create a more enabling environment for FDI. As a result, Ghana even surpassed countries like Nigeria in attracting FDI over the last three years. We have become one of the most advanced countries for FDI in West Africa and, by extension, the whole African continent. We improved the macro-fiscal environment, so it was comparatively easier to do business in Ghana. That was the first step.
We were beginning to introduce things that made it simpler and easier to do business: business reforms such as how to register a company, changing a company’s code, making access to justice easier for corporate entities and so on. We also had strategic industries that we were promoting and attracting FDI to. What Covid-19 has done, however, is make it more difficult for international investors to come into the country and do business with us because of travel restrictions and lockdowns. This has affected the normal flow of investors and investments.
As part of our management approach, we have aimed to develop a strategy to domestically produce a lot of materials that we were importing prior to Covid-19. This way, we don’t have to rely on global value chains and complain that global value chains have slowed down. Specifically, the opportunity it offers us is that now we can attract international organisations that were hitherto worried about competitive inflows into Ghana and would not invest in traditional areas here. Now there is an opportunity to pump money or equity into establishing businesses in these specific industries.
I know examples of industries or companies that were set up to produce protective equipment for medical entities or medicines, for example. We have produced locally some of the medicine we are using to fight Covid-19. As a consequence, those who want to invest in the pharmaceutical industry or in the fast-moving consumer goods (FMCG) sector to produce now-required items have a new opportunity to do so. Because global trade is slowing down, it means that domestic production and all sorts of goods are being boosted. What the government of Ghana is doing is flipping the coin and showing potential investors that there is now a more significant opportunity to invest and produce a lot of these items that we traditionally imported. That ties into a program that we had called Ghana Beyond Aid, which was essentially about building Ghana’s capacity to produce its major items.
Specifically, our government’s strategy for raising FDI figures is to focus a lot more attention on the local production of items that we were previously importing, and building partnerships between Ghanaian entrepreneurs and international businesses. We want to produce a lot of these everyday items, including pharmaceuticals and FMCGs, first for the Ghanaian market and then for the West African region.
BF: The UK trails China and India as a major source of investment into Ghana. What are some of the areas where UK foreign investment and businesses might find opportunities beyond mining, oil and gas?
KON: Traditionally, mining, oil and gas have been the major points of interest. I would say that one of the significant areas of interest now is the food value chain. Food security is one of the main issues that Covid-19 raises. Because of global shutdowns, you need to provide food value chain systems that work for your people – so there is a lot of opportunity in this value chain. In fact, the president has just carried out a visit to an enterprise in the north of Ghana where they are producing about 2,400 crates of eggs a day. This is part of our exercise to ensure that we are domestically self-reliant in producing food, we have to invest in this.
Apart from the food value chain, areas of interest are things like pharmaceuticals and FMCGs, but in terms of the broader Ghanaian and West African economy, as it has been growing. The market for technology-based products is beginning to open up a bit more, agro-processing is starting to move on, and fashion and lifestyle products are also beginning to advance – these are some of the areas that we think UK businesses or foreign investments can be focused on for gaining a comparative advantage.
BF: A focus on innovation and raising the added value of Ghana’s products and services has been a priority of this administration. This is linked to entrepreneurship, another priority, for which several supporting programs have been put in place. How would you evaluate the results achieved so far?
KON: I think we have made some modest gains in these early stages of our administration. If we had the same trajectory in 2020, we would then be getting into the space where our efforts were stimulated. Unfortunately, coronavirus has restrained us a little bit. Entrepreneurship is one of our major interests because, for example, the data tells us that about 92% of registered businesses in the country are micro-, small- and medium-sized enterprises (MSMEs). So we need to focus our attention on supporting MSMEs. We have capital, technical advice and corporate governance support in place so that they can grow, recruit more people and employ more people, and this will essentially help us to balloon the Ghanaian economy.
In the coming years as part of our economic recovery plan, we have to focus a lot more attention on MSMEs and supporting them to flourish, grow, become sustainable, create jobs, and create income and opportunities for the majority of our people across the country. You will see the balance in the president’s second term swing more towards MSMEs.
BF: Covid-19 has put public health systems across the world under heavy stress. How is the system working in Ghana and what is the government’s strategy for dealing with the pandemic at this level?
KON: I think what Ghana has recognised from the beginning is that no country has enough beds to accommodate large proportions of its population if they are sick. Your first focus must be to ensure that large proportions of your population don’t fall ill. The second is the fact that this is a pandemic – the virus is floating all over the world. How do you curtail the influx of the virus and its multiplication in your country, so that you don’t have undue pressure on your medical facilities? To do that, one of the things that Ghana has done is to close its borders to prevent the importation of cases and contain spread within the country. We have been on a massive public education exercise to ensure that people are aware and protect themselves, and we have passed laws to make it mandatory to wear masks. The government has invested hundreds of millions of Ghanaian cedis to provide what we call preventive logistics: sanitisers, paper towels, making water free and available so that people can consistently wash their hands. Electricity has also been made available to citizens for free.
These are bold, daring, innovative measures that I would like to see across other countries in the world. Our president and the government of Ghana are doing these things to ensure that the Ghanaian population is protected from multiplying spread. In addition to these things, we are also applying a very strong testing regime, which ensures that we can aggressively test the Ghanaian population and find people early if they have been exposed to the virus. The reason for this is that if we find people early, the chances of success in providing them with supportive treatment early so that they don’t develop complications are higher. So far, the mortality rate in Ghana as a result of this enhanced testing regime is under 1%, one of the lowest in the world. We have very high recovery rates because we are finding people early and supporting them in their recovery.
We are also ensuring that the socio-economic impact on our country is reduced. The combination of all these measures helps us get to the point where, despite the fact that the pandemic is floating all over the world, we can ease up so that people can have normal lives and be protected. I think that today, the statistics bear us out. We need a lot of public cooperation to succeed in this and are not out of the woods yet but our citizens continue to cooperate with the national efforts of the country.
Every week, the government engages citizens twice through my ministry – on Tuesdays and Thursdays – so that we can engage, get people to understand what they need to do so that we can save lives and to get their feedback. Our strategy is first to protect lives and second to restore livelihoods. Finally, we want to rebuild this country and this growth trajectory on which we were advancing together.
BF: Ghana’s Education Strategy Plan 2010/2020 has guided the efforts made by successive administrations to improve the education system. What are the main achievements in this area and what are the challenges ahead?
Over ten years ago, the man who is now president, Nana Addo Dankwa Akufo-Addo, made a very clear policy statement that education is the key to transforming the fortunes of Ghana. He was of the view that the role of finances in education had to be eliminated and he advocated for what he called the “Free Education Programme.” It took about eight years in opposition for him to win power and implement this programme. Today as I speak to you, over 1.3 million Ghanaian children are enjoying free education at senior high-school level. I am a member of parliament from a rural community, where families sometimes had to mortgage their houses, lands or farms before they could put their child through school. President Akufo-Addo has eliminated all of that because state policy is now that, if you are a Ghanaian child, one of your rights is to be educated by the state. That is a bold game changer and it has put millions of Ghanaian children in school for free.
This is one of our most significant achievements. If the free education programme did not exist, a good chunk of those children would be at home and not in school. Today, the old phenomena that I grew up with as a young boy on the streets of Accra – people selling dog treats to make a living – are a thing of history. You can’t see them. Today, finding young domestic help is also a thing of the past because everyone’s children can go to school. The president has ensured that the state has taken that as a responsibility and it has been added to our Bill of Rights.
A major challenge is how to continuously fund this bold initiative. Today, we are funding it though the national treasury without introducing any particular levy for it – it is just a prioritisation of resources but, moving forward, we will need to have national conversations on how to prioritise resources. I don’t think any future president of Ghana would want to contemplate taking away this right but the question will become how you fund it. Under the vision of President Akufo-Addo, we believe that if you are a Ghanaian, your Bill of Rights includes the right to have your head, heart and hands trained – that is education and it costs money.
BF: Presidential elections are scheduled in Ghana for November this year. What legacy will this administration leave as its first term ends and what are the central challenges for the upcoming administration?
KON: I think our legacy is across all sectors: education, health, the economy, agriculture, industry, services, security – you name it. The Ghanaian people will tell you that the president has already built a strong legacy for Ghana after four years. The challenge is that Covid-19 has shaken our fiscal position. We cleaned up national deficits from about 9% to under 5%, we passed a fiscal responsibility act that says that no government of Ghana should go over 5% in its deficit ratio unless in extreme circumstances. Coronavirus has wiped that away and we are going to have to suspend the fiscal responsibility act with a deficit of about 11%. The challenge, in my opinion, is that the Ghanaian people have an appetite for economic growth but our macro-fiscal position has been shaken. We need to find a balance between satisfying the new appetite of the Ghanaian people and maintaining macro-fiscal discipline. If I know anything about the president and his management team, they are up to the task and we are hopeful that we will deliver on it.
BF: Why should someone choose Ghana as a place to invest?
KON: Ghana has always been a leader in Africa’s development exercise. Over 60 years ago, Ghana was the first sub-Saharan African country to break the glass ceiling: to become independent and build a strong African democracy. Today, as Africa champions the next level of self-reliance, Ghana is leading the charge in what we call the “Beyond Eight”. It is a fantastic place to invest because a regime for good returns and security of investments is upheld.
It is also a warm and conducive place to be. To your readers, I would like to say that doing business in Ghana is doing business in the best place on the continent that you could ever imagine. Your money is safe, your prospects for growth are among the highest and, most importantly, what you end up doing will impact the lives of many people, lots of them young – Africa’s population is mostly young people who are very innovative. In addition, your money will be going to stimulate innovation, and the growth and development of young people across the African continent. We are happy to do business with you.