Ghana’s development dilemma: The quest for a pragmatic approach

Introduction

Many countries have adopted different approaches over the years to the issue of economic development. This is in view of the shifts in the development paradigm.

The historical account of Ghana’s political and economic journey over the years lends itself to these shifts. Since independence in 1957, Ghanaian governments have had to align themselves with either the East or West depending on the government’s ideological leanings at that point in time. This was an affirmation of what they considered to be the best approach to providing economic development to their country. In spite of that, Ghana seems to have come short of the required constituents for ‘development’ to take place.

It is within this conundrum that this article seeks to assess Ghana’s socio-economic development over the past years. The main advantage of looking at this is that, it would enable us to appreciate the concerns and issues the country has faced in its desire to become an equal participant in the global economic system and also understand why it has been seemingly inhibited in its strive to develop.

Ghana now and then

Ghana has gone through a number of political and constitutional arrangements since gaining independence from British colonial rule in 1957. The country’s murky political situation saw both military and civilian regimes in power at various times of its history. This situation clearly affected investment prospects over the years as investors shied away from the country in view of its unstable condition. Today with democracy firmly entrenched, the country’s electoral successes have made Ghana a paragon of good governance in the West African sub-region, which over the two decades or so had been better known for a spiral of violent conflicts (Frempong, 2006). Despite the country’s political success, constraints in the economy continue and ensuring the well-being of her citizenry still remains a considerable concern.

Ghana is a country endowed with resources – gold, diamonds and cocoa – but is yet to adequately derive the expected benefits from these commodities in developing itself. The most obvious feature of the country’s modern history has been the country’s poor performance weighed against her economic potential. Countries like Malaysia and Singapore, with which Ghana was at par during the early 1960s, have since made gigantic strides in their development plans. Why Ghana still lags behind seems quite baffling to many of its people. The country’s development plans have not held out over the years. Incoming governments have not sustained policies and plans developed by their predecessors. More recently, the Kufuor administration (2001–2008) threw out the previous government’s Vision 2020 plan under the guise of evolving a more appropriate response to the nation’s problems. These developments have not helped the nation the least since, as Wete (1994) argues, there is already a modicum of social development which is in need of sustenance.

The quest for development

Ghana, like many developing countries, undertook significant reforms under the auspices of the World Bank and the International Monetary Fund in the 1980s. The challenges that Ghana faced were twofold: the search for renewed economic growth and the translation of economic growth into increased employment opportunities to ensure the majority of the people reap the benefits of growth (Barwa, 1995). The transformation of Ghana’s economy was considered a test case for structural adjustment programmes (SAP). Foremost among the changes enacted in Ghana were the disengagement of the government from an active role in the economy and the encouragement of free market forces to promote the efficient and productive development of local resources. Following this intervention, export promotion and private investment were emphasised as the essential means to achieving economic growth and employment creation.

Although the reform programme had specific economic objectives, the main goal was to reduce poverty in the country (Sowa, 2002). Consistent with this, the annual budget statements of Ghanaian governments have since set poverty reduction as the overriding objective of national economic policy. The International Monetary Fund tagged Ghana as ‘a star pupil’ following Ghana’s adherence to the prescriptions it offered. But, as subsidies were lifted over many social provisions like education and health and workers retrenched as a result of downsizing in state organisations, Ghana emerged into murky political waters with workers agitating for more pay to offset the huge cost of living. In the last few years, for instance, agitations for improvements in service conditions of workers have been rife. Public university lecturers only resumed work in the first week of September 2013 after a month of strike. Prior to that, medical workers had also withdrawn their services over service conditions. Other categories of workers have also been on strike in the last few months too.

More recent studies attest to the exacerbation of poverty trends in the country. Youth unemployment, for instance, remains high and it is also observable to see young people, for lack of jobs, trading wares in traffic. Despite a series of debt cancellations following the country’s declaration of Highly Indebted Poor Country status in 2001, the national debt is still overwhelming. In 2011, the government contracted new external loans totalling about USD 4.3 billion, increasing the external debt stock by 21.7% over the end of December 2010 level to USD 7.6 billion (African Economic Outlook, 2012).

Currently, Ghana’s economic performance has been lauded in some quarters, but its development indicators compare poorly with many countries it is said to be in category with and the country continues to be challenged by slow progress (African Economic Outlook, 2013). Incidentally, the country has failed to develop sectors such as manufacturing and agro-processing in order to tackle the employment challenge and also provide economic opportunities to rural areas. For now, mining and construction have sustained the industrial sector, while manufacturing has been declining as a share of gross domestic product (GDP) over the past 20 years.

The massive investment in mining in recent years has not translated into significant increase in formal employment. In the mining sector, for instance, underground gold mines have been replaced by surface mining, which is capital intensive and employs relatively few people. The mining sector has also not been a major employer and most of the profits it makes are repatriated by the international conglomerates that dominate production and yet contribute relatively little revenue to the exchequer (Throup, 2011). The ‘gains’ from the sector in the form of increased investment are being achieved at significant environmental, health and social costs to people within the mining communities (Awudi, 2002). There is also lack of linkage between the mining sector and the rest of the economy. That aside, mining activities have also impacted negatively on agricultural production. In some of the mining regions, farmers now have less land to operate on as mining concerns have amassed more lands for their operations. The persistence of these problems accounts for frequent resistance by the affected communities and clashes between them and the mining companies (Sarpong, 2010).

Ghana’s manufacturing industry is largely stagnant and contributes only 9% of the country’s GDP (Throup, 2011). Productivity is low and has been declining over a long period. The sector faces a litany of problems. The impact of trade liberalisation has led to the collapse of many industries. Job cuts and distress financial conditions have crowded out local firms to the advantage of foreign competitors. Privatisation led to the closure or sale of 230 of the over 300 State-Owned Enterprises by the end of 2001 (Star-Ghana Report, 2011). Due to the lack of employable skills and education, coupled with the inability to find gainful employment in the urban formal sector, many Ghanaians now resort to informal economic activities such as petty street trading and load carrying. An estimated 54% of the labour force is engaged in informal economic activities with only 11.5% working in the formal sector (African Economic Outlook, 2012). Agriculture still remains the bedrock of the Ghanaian economy. It is predominantly on a smallholder basis and about 90% of farm holdings are less than two hectares in size, although there are some large farms and plantations, particularly for rubber, oil palm and coconut and to a lesser extent, rice, maize and pineapples (MOFA, 2011). The cocoa industry, for which Ghana very much depends on, is also failing to attract new farmers. The industry has made little effort to invest in high yield varieties or in the infrastructure that would allow Ghana to process most of its beans (Throup, 2011).

Ghana still faces significant challenges in its development trajectory, including productivity weaknesses, infrastructure gap, and capacity weaknesses and skills shortages among others. Its decision to use mining as a central plank of its developmental strategy has not helped much. The emphasis on mining was precisely because of its potential for revenue generation and perceived linkages to other economic activities. The position canvassed by the government, was that, mining would bring development, boost the local and national economies; raise living standards; correct inequalities; accelerate and generate employment. However, this policy has broadly been unsuccessful, in that, Ghana’s economy has not expanded to the level it was envisaged. The strategy has failed to improve in any significant way the welfare of the local communities where mining takes place (Akabzaa, 2000; Sarpong, 2010). Although investments have the potential of ensuring the well-being of the people, the recourse to mining as the central plank of Ghana’s development strategy has not helped in rectifying the economic imbalances being experienced in the country.

Majority of Ghanaians describe their economic conditions as dire. In 2003, the government developed the Ghana Poverty Reduction Strategy (GPRS 1) as the framework for coordinating social and economic development in Ghana. This was followed in 2006 by the Growth and Poverty Reduction Strategy (2006–2009). Since then, a number of initiatives have been taken domestically to help stem the rate of poverty and inequality prevailing in the country but not much has been achieved. More recently, the African Development Bank urged Ghana to strengthen efforts towards improving development outcomes, while also reducing inequalities in income and human development (African Development Bank, 2012).

Presently, the state’s capacity to implement development goals has been seriously compromised. Its capacity to ensure a sustainable flow of net returns from mining and other activities and to maintain political sovereignty remains highly blemished. Ghana’s skewed production structures have also focused on an enclave culture for many years, pushing the country to the periphery of the global economy. As Leys (1975) contends, being doomed to the periphery of the world capitalist system, leaves no room for alternative forms of economic and political development, especially so when there is a virtual disappearance of any alternative.

Although it is quite appropriate to indicate that the problems facing countries like Ghana are fuelled by escalating discrepancies in economic power, it seems the real debate centres on different ideological and value judgement about the nature and meaning of economic development and the principal sources from which it springs from. Granted that advocates of private foreign investment tend to believe firmly in the efficacy and beneficence of the free market mechanism, where this is usually defined as a hands-off policy on the part of the host governments, a hands-off policy as seen in the Ghanaian context seems to be a precarious thing to abide by. This is because the private sector’s priorities do not necessarily coincide with those of the state and its people.

It is therefore crucial to accept Lushaba’s (2005) position that development cannot be a mechanistic process driven by the market forces but a social and political struggle driven by a critical mass of people. Drawing on this, it becomes very difficult to know the kind of orientation that would best help in the pursuance of development. First, is it possible to devise a set of operational guidelines that would, if implemented, satisfy the criteria of meeting ‘development’ and at which stage can one significantly allude to the fact that one has reached the epoch of development?

Ghana is entering into a critical period in which its political, economic and social processes will demand the highest level of human development that the country can offer in order to ensure good governance and maximise its resources (Star-Ghana Report, 2011). Perhaps what Ghana needs now is an accelerated development, dependent though on both domestic policies and a supportive external economic environment. International cooperation should be based on the need to assist countries like Ghana in achieving their own balance between equity and efficiency. Policies to revitalise development must comprise those aimed at reaching out to vulnerable sections of the society. In pursuance of this, Ghana also needs to create institutions that can facilitate development in the first place. Perhaps a look at the whole issue of land reforms in the country could help; perhaps the need to explore whether the state could take over some functions normally left to the market elsewhere and having a government interested in and capable of promoting economic growth, would be pivotal. These institutional issues and many others like them are at the heart of the development process (Perkins et al., 2001).

Conclusion

Ghana has no option, it has to develop but it must choose a pattern of development which is sustainable and which will not be self-defeating in the long run. Decisions on how to spend the country’s increasing oil revenue, projected at several billion US dollars over the next two decades, will be crucial to future economic transformation. The increased oil revenue and foreign direct investment (FDI) inflows may result in strong upward pressure on the exchange rate and threaten prospects for industrialisation. Raising agricultural productivity and expanding market access for output should also be one of the ultimate objectives of Ghana’s efforts at the moment. Even if it is accepted that colonialism played a part in Ghana’s underdevelopment, as countries like Ghana were made to serve as export enclaves without an opportunity to develop the manufacturing and processing sectors of their economies, the fact that Ghana still maintains this disposition demonstrates its inability to free itself of this trend. Admittedly, no single factor is responsible for underdevelopment and no single policy or strategy can set in motion the complex process of economic development (Perkins et al., 2001). Even then, discovering the right economic policy and implementing it adequately to quicken the pace of economic growth and job creation in the context of Ghana’s economy and under the pressures of globalisation is a challenge, which Ghanaian policymakers will continue to be faced with in the medium-term (African Development Bank, 2012).