General News Tue, 4 Feb 2020
The economy and corruption will be in the spotlight in the December 2020 presidential election as Akufo-Addo and Mahama face off again at the pollsIt was a Kwame Nkrumah moment for President Nana Akufo-Addo in Upper East Region at the end of November.
That is, a point when grand vision meets high funding and ambitious politics. Across the political spectrum in Ghana, Nkrumah is the gold standard for mega projects, whatever their outcome.
This time, Akufo-Addo wanted to show northern Ghanaians, accounting for more than 16% of the population, that the government’s modernisation plans were relevant to them – although regional inequities are deepening.
More than half of the people in the north are living in extreme poverty, according to the International Institute for Strategic Studies. And alarm bells have been ringing because of a surge of extremist attacks in neighbouring Burkina Faso.
Unlike many of its troubled neighbours, Ghana has had a stable and functional multiparty political system for 25 years, unthreatened by insurgencies or extremist groups. That history has encouraged a dangerous complacency, according to Kwesi Aning, head of research at the Kofi Annan International Peacekeeping Training Centre.
The historical lack of investment in the northern region is part of the problem. Belatedly, politicians have been trying to remedy that.
Gathered around Akufo-Addo to break ground on the $993m Pwalugu dam project were members of the government’s top team – vice-president Mahamudu Bawumia and energy minister John Peter Amewu – together with a crowd of favoured MPs and traditional dignitaries.
At a discreet distance stood a delegation from Sinohydro, a Chinese state-owned company that is central to Ghana’s industrial development and infrastructure plans. Earlier in the year, the government announced that Sinohydro had concluded a barter deal to buy some $2bn of bauxite, the proceeds of which would be used to build roads, dams and factories.
‘We do not renege on promises’ The Pwalugu Dam is one of the first items on the shopping list. But the financing process, outside of the country’s agreed debt limits, raises questions about accountability and value for money.
It is also a grand entry for Sinohydro into the Ghanaian market: by raising the cash from the barter deal, it avoided the difficulty of a competitive tender process.
Brimming with pride as he planted a sapling on the construction site, Akufo-Addo said the dam was the biggest construction project ever seen in the northern regions. It would include two turbines generating 60MW, alongside a solar power plant producing 50MW and an irrigation scheme servicing 25,000ha.
After three years in power, Akufo-Addo is facing critical scrutiny across the country, especially outside his party’s heartlands of Eastern and Ashanti regions. That explains the grandiose ceremony at Pwalugu.
It is one of a series of projects in the north such as a road interchange network in Tamale, the country’s third-largest city. Again, the finance comes from the barter deal with Sinohydro, which also picks the contractors for the works.
“This is in fulfilment of the pledge the government made to the people,” Akufo-Addo told the crowd. “We do not renege on our promises.”
Questions about promises are to the fore as Ghana heads into a year of campaigning ahead of elections in December 2020. At the presidential level, it will be a return match between the New Patriotic Party’s (NPP) Akufo-Addo and John Dramani Mahama of the National Democratic Congress (NDC).
It will be the third time they have raced for the top job together. Mahama won in 2012, after a protracted appeal launched by Akufo-Addo’s legal team; Akufo-Addo won in 2016 by almost a million votes, his party running a textbook and very expensive election campaign.
Both Mahama and Akufo-Addo got into campaign mode in late 2019, months before their parties were due to launch their manifestos. A spat also emerged over why Mahama reneged on a promise to support the plan to hold a referendum to introduce partisan politics into local elections in mid-December.
The 2020 race is likely to be closer than the last one. Mahama’s advantage will be that the bulk of the blame for the current economic discontents are laid at the door of Akufo-Addo and finance minister Ken Ofori-Atta. The sins of the last NDC government have largely been airbrushed out.
Politicians to the core There are signs that the election could get really bitter. Both politicians to the core, Akufo-Addo and Mahama have quite different styles. An experienced barrister, Akufo-Addo thinks fast on his feet and is seriously interested in policy intricacies. By contrast, Mahama, whose most high-profile job outside politics was as an information officer at the Japanese embassy, is more interested in big-picture arguments or conversations with voters.
Mahama ducked a debate with Akufo-Addo in 2016 but may see an advantage in taking him on publicly in 2020. The political climate seems to have become a little more poisonous since then. Each party accuses the other of thuggery. NDC activists claim the NPP has integrated its footsoldiers into the state security apparatus.
Postings on social media showing members of the government driving uber-luxury cars or on yachts partying in the south of France are going down badly given that most people are experiencing a stagnant economy – even if the IMF’s stats say otherwise. They also make it easier for the NDC to paint the NPP as a party of privilege and raise questions about the origin of that wealth.
Mahama lacks the mega resources of the NPP and its advantages of incumbency. But the NDC is a much more activist and grassroots party than the NPP. If Mahama and associates can pay key officials on the ground, they can get out the vote. Turnout will be key in 2020, and that helps the NDC.
That national network has allowed the NDC to strengthen its presence across the country and accuse the NPP of being an Akan party, with little support in Volta Region or the north, from where Mahama hails. With vice-president Bawumia rubbishing Mahama’s legacy in northern Ghana, it’s evident that the northern regions will be a key battleground in 2020.
So will Greater Accra, where there are some of the loudest complaints about the slow economy. To counter that, the government says it will launch a new series of urban rehabilitation projects in January.
Although he organised big, free concerts in 2016, that did not give Mahama enough youth votes to counter Akufo-Addo’s challenge. This time, he lacks the resources and will be reliant on his charm and honed campaigning skills.
When The Africa Report caught up with Akufo-Addo in Kumasi on 1 December, he said that the campaign would be about making the link between his policies and living standards, motivating the faithful and galvanising the waverers. “It’s going to be about our success in rehabilitating the economy, our social interventions in health and education, improvements to transport.”
After his victory in 2016, Akufo-Addo told The Africa Report that a key measure of the government’s success would be whether it improves the lot of the market woman who gets up before dawn, often working 12-hour days to feed and school her family.
Was her plight any better now? “I think it is,” Akufo-Addo claimed in December. “Her children would be eligible for free senior high school education and access to public healthcare under the revamped state insurance system.”
Yet his confidence about voter sentiment is not borne out by a recent survey from Afrobarometer, which found just 30% of respondents thought economic conditions were fairly good or very good. And in terms of social equity, 66% of respondents said the government was doing a bad job of narrowing income gaps; 54% said it was not creating enough jobs. More widely, 59% said the country was going in the wrong direction.
One reason for such views, according to NPP officials, is the state of the economy they inherited in January 2017. Then, the government’s debt was ballooning, surpassing 70% of GDP, much of it to finance unsustainable power projects.
There was also, according to finance minister Ofori-Atta, a looming financial-sector crisis which, if it hadn’t been dealt with, could have paralysed the economy. According to the latest figures from Ofori-Atta’s 2020 budget, restructuring the banks, savings and loans companies, as well as the power sector is set to cost more than ¢30bn ($5.3bn) – or about 10% of Ghana’s GDP.
The subsequent drag on the economy with that much money allocated to complex reforms, with little short-term benefit to living standards, has prompted analysts such as David Cowan, Africa economist at Citibank, to ask if the timing of the reforms was right.
The cost of the banking reforms, according to Cowan, was higher than many had expected, including some inside government. “The combination of these two policy battles is sapping some of [the government’s] political energy,” Cowan wrote in a briefing note, “in particular the one-off spending costs which seem to have attracted considerable attention and have domestic political implications.”
By that, he meant the money could have been spent on more growth-enhancing projects, to boost incomes and create jobs. Did Akufo-Addo have regrets about those reforms? “The reality was that we met these issues head on. […] It would have been irresponsible not to have tackled these crises in the way we did,” he said.
However, Cowan makes a wider political point about the government’s mindset. Although most of the macroeconomic trends are positive, the government is on the defensive.
In the last week of November, Ofori-Atta wrapped up the debate on the 2020 budget in parliament with a set of glittering statistics: GDP growth doubling to 7% over the last three years; inflation
halving to 7.7%; the fiscal deficit is under 4.5% of GDP; the trade balance is in a surplus of $2.6bn in 2019; and 1.2 million Ghanaians attend secondary school free of charge, justifying the outlay of ¢2.2bn.
Despite the cheerleading, Ofori-Atta was concerned enough about the throughput of his policies to announce a 21% boost to government spending in 2020. And he plans to raise another $3bn on the eurobond markets to pay for some delayed road-building projects and help restructure medium-term debt.
Under pressure None of that, insists Ofori-Atta, is about priming the treasury pump ahead of elections. Two years ago, the government passed a fiscal responsibility bill limiting budget deficits to 5% of GDP, constraining its spending impulses – at least on paper. Like the banker he is, Ofori-Atta has been adept at cutting debt service costs, by stretching out the maturities of some of the government’s paper. He has been less successful in resolving the revenue-spending mismatch.
The business-minded NPP stood on a platform of cutting taxes in 2016, and it tried to cut rates and specific taxes for individual taxpayers. With a tough three years ahead – lower oil production and prices, a big tax holiday for the country’s top gold mining company and a commitment to uphold improved buying prices for cocoa farmers – Ofori-Atta and the treasury are under pressure.
In 2020 the government is determined to fund its pre-election road-building programme. That will not cost them support as long as they do it without raising taxes on individuals. The main complaint from interviewees on the street was about the government’s reluctance to spend, not its extravagance. Ofori-Atta’s goal is to raise tax revenue to 20% of GDP from the current level of 13% over the next three years – just as GDP is forecast to dip to an average of 5.7% from about 7%.
The best explanation for why the government appears to be on the back foot, Cowan argued, is the divergences between the economic data, investor views and popular sentiment, much of which is negative. Less than a year before elections, that worries a governing party.
And it delights the NDC, according to Samuel Okudzeto Ablakwa, the party’s foreign affairs spokesman in parliament and a former deputy minister of education. “Our internal polls are looking good,” he told The Africa Report. “People who voted for the NPP are asking about all those promises.”
Ablakwa is particularly exercised by the NPP’s claims that his party is tarnished because of abuses of office. Many of the accusations concern the ‘emergency’ power deals negotiated under Mahama. It established a ‘take or pay’ system for producers. Because Ghana now has too much electricity, that system is costing between $30m and $50m a month.
Akufo-Addo has cancelled those provisions, triggering fresh legal fights. Ablakwa dismisses it all as posturing: “Look at the contract for gas turbines with Ameri in the UAE [United Arab Emirates] – the NPP said the cost of $510m was too high and the deal was corrupt.”
But the NPP government’s investigation into the contract was bogus, he said: “They allowed Ameri to sponsor the investigation. […] They paid first-class airfares to Dubai and for five-star hotels. […] Then the investigators proposed that the contract should be extended and another $300m added to it.”
A row blew up in August about the proposed new deal with Ameri and the energy minister Boakye Agyarko was sacked. Angry at the government, he tells friends he was made a scapegoat and will explain all “at the right time”.
Ablakwa added: “We are going to get tougher on these cases in 2020.” He is pushing for a more activist parliament too: “a rebalancing away from the excessive powers of the executive. We lack the ability to hold a bloated government to account. […] We seem to be ruled by family and friends.”
That last remark referred to the myriad charges of nepotism against the NPP government, appointing more than 100 ministers and business colleagues to sinecures within the system. One of the prime targets for those accusations, Gabby Otchere-Darko, a combative corporate lawyer, is known as the ‘prime minister’, a soubriquet he laughed off.
Otchere-Darko robustly defended two of the most criticised deals approved by the government. “The $2bn Sinohydro deal offering the company bauxite is not really barter at all,” he told The Africa Report. “It was just a smart way of avoiding the IMF’s limits on taking on fresh debt. […] We’re going to repay the loans with the revenue from the projects.”