Business News Tue, 30 Apr 2019

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FEATURE: The structure of the world economy and the performance requirement of Ghana

In other to have confidence in the destiny of this nation to produce a trade surplus and its impact on the exchange reserve, we need to probe and dive deeper into the structure of our GDP and ask realistic questions resulting to a practical approach towards generating surplus, which will add up to the country physical capital than the usual political blame games acting as mirage in denying the honest and pragmatic politico-economic decisions, which is required to exploit the global market in a comparative advantage to grow our endogenous economy.

According to the Report of World Bank and United Nations, the structure of the World Economy as at 2018 in percentage of GDP were as follows;

- Service Sector 67.4%

- Industrial Sector 28.1%

- Agricultural Sector 4.5%

If the current performance of the World Economy is traced back 20years ago, from 2018 to 1998 with data-point, the following were result obtained among the established sectors

- Service Sector 66.6%

- Industrial Sector 29.4%

- Agricultural Sector 4.0%

The following were observed in respect to the data analysis;

1. The Service sector in a period of 20 years, starting from 1998 to 2018 had increased 0.8 percentage point

2. The Production Industry within the same period had decrease about 1.3 percentage point

3. The Agricultural Sector had significantly increase about 0.5 percentage point

This demanded critical questions to be asked, why such a rise of 0.8% point of Service sector from 1998 to 2018, yet a decline of 1.3% point of Industry and 0.5% increase of Agricultural sector?

One of the major prominent cause per the data, was observed to be the cost of obtaining Capital for Enterprise operations. It was realized, within these 20years, the cost of obtaining capital has tripled(3x), to estimate it in percentage wise is approximately equal to 1.3% just directly proportional to rate of Industrial decline.

This therefore indicates that all companies whose capacity in raising capital for industrial productions, which fall within the range of 1.3% as a cost to extract capital from the market had to all die-out of the industrial competition but wisely diversify to other sectors with less competitive market control and Investment. Hence an observation of 0.8% shifted to Service and 0.5% to Agricultural Sector.

Per the data, there is an observed trend of the cost of obtaining capital for Enterprises rising beyond linear to an exponential trend in the next 6-10 years ahead from 2018 in developing countries with Ghana as a case study,and this is as a result of spillover effects of sovereign debt market, if all observed conditions remain constant as currently.

Why is the industrial actors diversifying to Service sector more than any other sectors? it is observed that the average investment capital for service sector is very low comparable to any other existing sectors, hence the world run a risk of a protruding service sector without a corresponding industry.

However in the service sector, due to match-up number of sector players, there is a fierce competition with clients having varied choices of quality services to opt for, either in tourism and hospitality industry, educational industry, aviation industry, health industry, technological industry etc.

This implies the kind of service to enjoy today from service providing companies is no more like that of 20years ago in character but a kind, which has a signature of exceeding market expectations.

The implication to companies, in this sector, is the capacity to operate in supersonic delivery, entrenched in innovation, largely driven by research & development or suffer from extinction in the next five (5) years as the findings indicate and replaced by competitors.

It is therefore not surprising of government of Ghana losing most of it companies to the hands of foreign investors as at 2000 to 2018 with no options prevailing on the oval-table of calculations, in other to meet the global competition of efficiency and performance.

In the Agricultural Sector, it is observed, developing countries, especially in Africa, due to easy access to Lands, has a comparative advantage in the global market.

Then in addition, the presence of quality seeds that could stand climate change and pest infestations, establishes their competitive advantage stronger.

However what was observed to be crucial requirement to sustain that advantage in realistic terms is quality management skills, which should be business oriented, proper storage mechanism, innovative micro-finance related investment and finally available market networks.

I do therefore conclude that, if you realized as a citizen and an investor, in the presence of competition, your Enterprise is not performing in the service sector, and the capital propensity of industry makes it a no go area, there is still an opportunity at the Agribusiness sector, which is market friendly to exploit with the full might as an Entrepreneur to strengthen the GDP scale of Ghana’s economy.

However need to discourage the tendency of populist connecting all activities of the economy in superstitious context, and eschew spending long hours at spiritual centers, believing to hold supreme response to our economic performance very prevalent in Africa, citing Ghana as no exception and do recommend that such an act, should be treated as enemy of competitive progress, by the policymakers because it affects our performance as a nation at the global market.

Dean of Research, University College of Management Studies-Accra, Ghana

Frederic Bastiat Institute (www.fbiresearchedu.org)


Source: Emmanuel Tweneboah Senzu

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