The Economy in 2014 and the Call for "Elevation"
- peterkyei
- Jan 4, 2015
- 6 min read
A bird’s eye-view of the performance of the Ghanaian economy under His Excellency John Dramani Mahama reveals this: the president inherited a buoyant economy hovering at a growth rate of 14.1% – 10% thereabouts between 2011 and 2012. During this period, the Ghanaian economy was one of the fastest, if not the fastest growing economy in the world. However, by second quarter 2014, the hitherto buoyant economy had crash landed to a comparatively miserable growth rate of 5.3%.
For a developing economy, this is a great cause for concern. It must be said that, the attainment of a double digit growth rate in Ghana, though aided by oil revenues, was as laboured as the growth rate of a coconut tree. Sadly however, the drop experienced over the last couple of years in the Ghanaian economy can be conversely likened to a coconut falling from its tree.
That having been said, the point must also be established that the decline in growth rate was not as much the issue as was the kind of prognosis and attendant policies adopted by the relevant Ministry and sector agency to address the matter. While international rating agencies, including Fitch and Moody’s, attributed the matter to fiscal indiscipline on the part of government among other reasons; the Ministry of Finance and Economic Planning (MOFEP) as well as the Bank of Ghana (BoG) will have none of that.
As such, in the wake of poorly executed projects such as GYEEDA, SADA, SUBAH etc. immediately on the hills of election 2012, the spate of mounting consumptive expenditure was a veritable problem; However, it was left unchecked. Without commensurate value creation and returns, the free floating monies from these ill-thought-out projects could be said to have largely accounted for the inflationary spiral of the economy. The cash splash that ensued also compelled donor agencies to develop cold feet towards our country.
To exacerbate matters, global gold prices kept dropping like dry leaves in the harmattan. Ghana is essentially both a mono-mineral and a mono-crop economy which is largely reliant on the yellow metal and the golden pods. As such, the camel’s back eventually got shattered when a similar fate of dipping market prices befell cocoa.
Despite all these happenings, MOFEP and BoG maintained that the fundamentals of the economy were robust. As a result, when the cedi begun to depreciate in tandem with the unfavourable conditions outlined above; the fiscal and monetary authorities would rather attribute the untoward happenings to currency speculators and huge construction and real estate projects. Some government functionaries were reported, I believe pejoratively, as attributing the Cedi’s crisis to ‘Juju’ and ‘dwarfs’.
In the end, a faulty diagnosis of our ailing economy led to the adoption of a rather touchy and draconian Foreign Exchange (FX) policy; led by MOFEP and BoG. Consequently, in one fell swoop of a goof, the Cedi was depreciated by more than 38% in the first nine months of 2014; thus putting pressure on import prices and sending the currency into an unprecedented hysteria.
It must be said that the economic challenges that befell the John Mahama led NDC government, whether self-inflicted or genuine, will present no walk in the park for even the most astute team of economic wizards. Because, just as BoG decided to undo its self-defeating FX policy and MOFEP saw reason to insist that the fat cats tighten their belts a bit, thunder struck at the same place twice.
Considering Nigeria’s incessant energy need and vast size, Liquefied Petroleum Gas (LPG) became more profitable, hence the West African Gas Pipeline (WAGP) began to renege on the gas supply agreement. Ghana National Gas Company (GNGC)’s delivery was also never to come. In the end; the entire country, after having just encountered the headwinds of a swirling currency, was immediately plunged into a gulf of darkness till date. Short of feedstock supply for thermal plants and low water levels in the Akosombo hydroelectric dam have essentially tied down VRA and the other Independent Power Producers (IPPs).
While the Ministry of Energy is essentially flapping about with no clear cut strategy to resolve the issue, a new Power Ministry has been created in the heat of the entire meltdown. Though it is critical for the Electricity Company of Ghana (ECG) to clean up its act and at least attempt to more than break even with the cost of generation and transmission of power, one wonders how the additional institutional burden of creating a new ministry will help address the problem.
In the final analysis, two major sectors of the economy were severely affected. Industrial Growth Declined from 7.3% to 4.6%. The Service sector plummeted from 9.6% to a lowly 4.6; the worst since 2007. These sectors, which are naturally more dependent on the availability of power, understandably bore more of the brunt of the Energy Crisis. The entire economy was thus essentially left to rest on the shoulders of the often neglected agricultural sector.
In view of the afore sketched imagery of the currency and energy crisis, one can only expert a heavy toll on the general economy - with attendant hardships on the people. To pretend that any socioeconomic setup will remain resilient after such hefty knocks, on its key pillars of Industry and Service, will amount to nothing short of playing the ostrich. As such, a recent call from a mouth piece of the Flagstaff House; which sought to state that, the General Secretary of the Convention People’s Party (CPP), requires some form of “ELEVATION” in order to speak on these matters of blatant economic hardship leaves much to be desired.
Such a call can only be interpreted in two ways; as an insinuation directed at the General Secretary’s disability, or an attempt to denigrate his sense of perception of the rather palpable economic difficulties of the day. No matter how you look at it; such a comment remains socially uncivilized on the one hand and utterly preposterous on the other. As such, it must be condemned in no uncertain terms and treated with all the contempt it deserves. After all, who needs any “ELEVATION” to view an economy already crumbling to the ground like a house of cards?
Nonetheless, the unfortunate incidence above should not take away from the call by the NDC government for a fair hearing. They believe the populace needs to acknowledge a number of projects they have initiated in the last couple of years. Key among them is the Kwame Nkrumah Interchange, a number of road construction projects, rehabilitation of the major airports, among others.
It is true that the developments above should lead to the creation of some jobs and in the end result in some level of growth. There has also been the issuance of Sovereign Bonds for deployment of further infrastructural and Social Intervention programmes. All these measures, assuming they were well executed within cost and scope, should be expected to have brought some relief to the suffering masses.
However, the government fails to realize that their inability to adeptly handle challenges; as pertained to the matter of the currency and power, and their penchant for perpetual incremental taxation, only serve to erode other decent gains. In effect, the NDC’s attempt at governance in the last couple of years has essentially panned out to be a zero sum game – with no net benefit accruing to the people.
While we are at it, amidst the gnashing of teeth in this economic apocalypse, the 2015 budget seeks to further impose a 17.5% Special Petroleum Tax on a system already reeling from the effects of inadequate spread and inventiveness in the tax regime. Next year’s budget also seeks to tackle the current power crisis by proposing the generation of an additional 770MW of power from thermal sources. The critical question to be asked remains; as things stand, the existing thermal plants do not have enough feedstock to generate up to capacity. So how does government plan to fuel the generation of the proposed 770MW in 2015?
To conclude, Christmas is here, but as the MOFEP boss, Seth Terkper rightly confessed; the way out of the woods for our economy is still not clear. Subsequently, there isn’t much to celebrate in terms of socioeconomic success. All that notwithstanding, we must as a nation, be thankful to the almighty for another peaceful year.
But still, Mr. President, the fact remains that “Boys Abr3!”
Writer: Jason Tutu
