The autumn of 2015 looked like it was off to a poor start with news that Burkina Faso was witnessing its seventh military coup in 50 years. But one week […]
The autumn of 2015 looked like it was off to a poor start with news that Burkina Faso was witnessing its seventh military coup in 50 years. But one week later, after lasting just seven days, General Diendere’s coup collapsed after pressure from West Africa’s leaders.
President Mahama, former head of ECOWAS, praised the organization and its role in returning Ghana’s neighbor to civilian rule. He told a French TV channel weeks later that events in Burkina Faso were “a sign of hope that Africa has changed.“ The coup was met with the expected statements of condemnation from the UN, the EU, and the African Union. ECOWAS went beyond that, holding an extraordinary session in Nigeria, where it was decided that a six-member mediation team would be dispatched to Ouagadougou. President Mahama, with the Vice President of Nigeria, arrived and, after negotiations, asked the military to withdraw to its barracks. ECOWAS’s role laid the foundation for the return to civilian rule, and has been taken as a sign that the dynamics have changed in West Africa. Ghana, as a prime example, has been a model of democracy since 1992, with six peaceful elections.
In 1957 Ghana was the first country to gain independence from its former colonial masters, triggering a domino like liberation movement that lead to the demise of colonial rule in Africa. Ghana has since navigated tumultuous periods of army rule and political uncertainty. Since 1992 the country has had peaceful elections. Compared to its neighbors, with Ivory Coast seeing violence in 2010 when Laurent Gbagbo refused to cede power after electoral defeat, and the riots in 2011 when Goodluck Jonathan was re-elected as Nigeria’s president that killed 800, Ghana has remained an example of the model democratic process. In 2008 John Atta Mills won the 2008 elections and remained president until his death in June 2012. Under the leadership of Mills, an economist, Ghana became a hub for foreign investors, becoming Africa’s second-fastest-growing economy in 2011 with a 13.5% expansion rate. Under Mill’s tutelage Ghana was shaped into a model of good governance and an anchor of stability.
More recently, economic hardship brought along by the fall in global commodities hit Ghana hard. In 2010 the price for commodities like bauxite, manganese, and gold dropped. A year later, Ghana first produced its oil and gas, but the revenue was short lived with oil prices dropping in 2015. Ghana has since realized that the economy needs to be reformed from a commodity export-based economy to one that processes its materials and creates value in country.
So far, this agenda is being pushed in parliament, and the IMF has extended its credit facility in order to facilitate this change to the macroeconomic environment, with the aim of reducing the fiscal deficit and interest rates.
With the public sector constrained by fiscal discipline, the drive to build in-country value chains is heavily reliant on external sources of funding. According to Santander Trade, at the end of 2013 Ghana was the fourth largest recipient of FDI in sub-Saharan Africa. NCTAD’s World Investment Report 2015 was launched in Accra, noted stable FDI inflows, despite a drop in FDI to Ghana with $3.61 billion in 2013, declining to $3.57 billion in 2014.
As it stands, Ghana has an 8.6% average tariff rate and government procurement procedures can favor domestic firms. However, high interest rates on banks are limiting financial opportunities for new companies. For the region, sustainable economic growth is dependent on ensuring FDI support for building in-country value chains. Political stability is key to this, with cross-border alliances further strengthening institutions. As a result, Ghana has seen fewer, but higher-value projects over the last year. In 2014, the number of inward investment projects fell to 39 from 58. TAQA, an energy group from Abu-Dhabi, is building the Takoradi 2 gas-fired power plant. Productive partnerships between business, government, and the international community look to be the future of economic growth in Ghana, showing the way.