• Setting the benchmark

    Ghana’s continued social and economic successes position the West African nation as an example to the rest of the continent

    Setting the benchmark

    Few pundits would have tipped Ghana to be one of Africa’s winning countries during the nation’s first three decades of independence. Four military coups, a period of single-party rule, poverty and economic stagnation appeared to be Ghana’s lot from the moment it became the first colonial African country to achieve independence in 1957, until well into the 1980s.

    Yet since the return to civilian rule in 1992, Ghana has become both a consolidated democracy and an economic success story. The country, which had been categorised as a highly indebted poor country in the 1980s and the subject of one of the most rigorous structural adjustment (austerity) policies ever imposed by the World Bank, grew its economy so successfully that it was reclassified a middle-income country in 2007. Ghana was the first sub-Saharan African country to achieve the first UN Millennium Development goal – the reduction of extreme poverty by 50%, which it had done by 2006.

    Ghana’s economy grew at an average rate of 6.5% between 2000 and 2014. For two years after that, the country’s growth rate plunged as global commodity prices melted down. But Ghana’s economy is resilient and rebounded to a level of more than 6% until COVID-19 struck in 2020. Even that year, growth remained positive although minimal (0.88%) as Ghana experienced its first recession in 38 years. 

    Overall, the data shows that Ghana’s GDP per capita more than tripled between 2001 (US$630) to 2020 (US$2 223) although this impressive growth rate has to be offset against high inflation levels.

    Perhaps more importantly, Ghana has also become an enduring democracy over the same period. Since 1992, it has had regular competitive elections and undergone peaceful transfers of power between the two main political parties. 

    When the present incumbent, Nana Akufo-Addo (now into his second term) defeated John Mahama in the 2016 presidential election, it was the first time a sitting president had been defeated at the ballot box. Freedom House, which takes a wide range of civil and economic liberties into account, rates Ghana’s system wholly ‘free’ – one of only five such ratings on the continent. 

    The habits of democracy were established under the presidency of flight-lieutenant Jerry Rawlings, who initially ruled after military coups (1979 and 1981) but was later democratically elected (1992) after handing over to civilian rule. The country’s first president, Kwame Nkrumah, the father figure of pan-Africanism, was deposed by a military council, which cited economic mismanagement as its justification. When Rawlings led a coup against the military council in 1981, he gave exactly the same reason. At the time, Ghana was experiencing spiralling national debt and an inflation rate of more than 100%. Rawlings called his period of authoritarian government a ‘housekeeping exercise’. 

    Although Rawlings, like Nkrumah, remains a polarising figure, his reforms (mostly privatisations) and eventual democratisation appear to have become deeply entrenched. When Rawlings passed away in 2020, Akufo-Addo noted that ‘a great tree has fallen and Ghana is poorer for the loss’.

    Nigerian President Muhammadu Buhari said ‘the passion, discipline and moral strength that the former Ghanaian leader used to reposition his country over many years continue to reverberate across the continent’. 

    Ghanaian politics continues to be robust and competitive. The winning margin in elections is usually narrow – 51.59% to 47.36% in the 2020 election – but the results tend to be widely accepted. The World Bank argues that ‘Ghana consistently ranks in the top three countries in Africa for freedom of speech and press freedom, with strong broadcast media [and] with radio being the medium with the greatest reach’. The bank considers Ghana to have ‘solid social capital’ thanks to factors such as these. 

    The economy of Ghana is still heavily dependent on the primary sector. The country’s three main exports are gold, oil and cocoa. Gold has an ancient pedigree in the country. Prior to independence, Ghana was called the Gold Coast, a reference to an ancient gold-trading network that crossed the Sahara desert to the Mediterranean since at least the Soninke empire of Ghana in the eighth century. Ghana is Africa’s largest producer of the yellow metal, having surpassed the output of the faltering South African industry in 2019.

    Ghana produced 140 tons of gold in 2020, a slight reduction on 2019, due to the impact of the COVID pandemic. This makes the country the world’s sixth-largest producer. Gold makes up about 37% of Ghana’s export earnings and, according to international mining company Newcore Gold, 49% of FDI. Newcore Gold argues that ‘southern Ghana has been considered one of the world’s most prolific regions for gold discoveries for some time’, and has attracted investment from most of the major gold-mining companies.

    Ghana is Africa’s second-largest producer of cocoa, an industry that primarily comprises small-scale farmers

    Until the reforms under Rawlings, in 1983, all gold production was state-owned. The government retains a 10% carried interest in all gold operations but the sector is now dominated by international players. These companies include Gold Fields (which owns Tarkwa mine), Newmont (Ahafo and Akyem) and AngloGold Ashanti (Iduapriem and Obuasi). AngloGold Ashanti is itself a product of a merger between the Ghanaian and South African companies, formed when the two consolidated in 2004. The company is the world’s third-largest gold miner measured by production.

    Cocoa cultivation goes back to the 19th century and is particularly important because it affects so many people. The crop is grown on smallholder farms of 2 ha to 3 ha allocated under a traditional land-rights system and provides a livelihood to an estimated 6 million people (out of a population of 30 million). Ghana is the world’s second-largest cocoa producer after neighbouring Côte d’Ivoire.

    The cocoa industry in Ghana has been controversial because cultivation has traditionally been the least valuable part of the value chain. Most profits accrue to foreign chocolate makers. In 2016 Ghana and Côte d’Ivoire combined their strengths – they jointly produce nearly 70% of the world’s cocoa – and set up a producer cartel. The objective was to put an extra US$400 per ton (called the living income differential [LID]) in the pockets of small-scale farmers by trading on the ethical-sourcing label. 

    The cartel – jokingly referred to by Ghana’s president as ‘Chocpec’ (a play on the name of the international oil cartel Opec) – hinges on controlling supply as much as the co-operation of cocoa buyers. Côte d’Ivoire, which produces a considerably larger volume of cocoa beans than Ghana, has agreed to cap production. The LID is expected to take effect during the current growing season.

    The discovery of substantial quantities of oil is much more recent. The offshore Jubilee oilfield was discovered as recently as 2007. Commercial production started in 2011 and Ghana is today one of sub-Saharan Africa’s top producers. The oil industry continues to expand, with new discoveries having come on-stream – the Tweneboa Enyenra Ntomme oilfield began production in 2016, and the Sankofa gas discovery came on-stream in 2018. 

    Ghana’s hydrocarbon windfall has made a considerable difference to the country’s energy security. Thermal generation, using natural gas, has replaced hydro as the main source of power. Eighty-three percent of Ghana’s population has access to electricity and the country has ambitions to become Africa’s first liquefied natural gas exporter in the near future. Reliable electricity supply is critical if Ghana is to diversify its economy beyond primary products. 

    There are promising signs in this area, with Volkswagen opening an automotive assembly plant in Accra last year and Nissan having well-developed plans to do the same in the near future.

    The big three – gold, oil and cocoa – account for about 80% of Ghana’s exports. There are often balance of payments and currency issues for countries that are heavily commodity-dependent, and Ghana is no exception. The COVD-19 slowdown both sharply increased government’s borrowing needs and the price of state debt. 

    Ghana has put in place all the building blocks it needs sustained growth. Ghanaians have been known to describe their country as ‘the laboratory of Africa’, because so many important development measures have been tested there over time. These range from political independence to military government to re-democratisation, and have produced a coherent nation with big ambitions. Its success will provide a beacon for the rest of the continent.  

    By David Christianson
    Images: Gallo/Getty Images