Opinions Fri, 18 May 2007

Ghana's Untapped Potential

There is general consensus in Ghana , that macro economic performance of the economy has been sterling . Despite backbreaking fuel and energy costs, the economy remains resilient. Continued sustainability of this growth and stability of the economy must be stepped up , by depending not only on foreign aid inflows, but also on our own internally generated resources!! If we put our house in order, then foreign businesses will be encouraged to join in. We are not a people bereft of creativity. We took an insignificant import of cocoa seedlings, and turned it into our greatest export!!

Indeed Ghana at one time was the largest producer and exporter of cocoa beans in the world till 1976 !!! - and this crop is not even indigenous to our land !!!

CAN THE LION ROAR AGAIN ?? Sure it can !!!

The major stakeholders in every economy are the Government (Public Sector), the Private Sector and Higher Education. These three stakeholders must have a symbiotic relationship that translates into a shared vision of working together towards national development. It is encouraging that, Government, as a matter of policy, has tried over these past years to drum up foreign investments to supplement local private initiatives . However more needs to be done, especially in the informal sector where most people are engaged in non-regulated trade and commerce. The present situation where total tax revenue from this sector is only about 22% of GDP is simply disappointing . A large section of the self-employed in Ghana , including high earning professionals do not contribute anything directly to the national kitty .

Current records show that, most of the money released by the Bank of Ghana remains in private hands. Ghanaians do not invest in the Stock Market. Right now, only about 0.0005% of the country's 20 million people invest in the Stock Market. The current situation where more than 70% of issued shares on the Stock Exchange, are in the hands of non-resident foreign investors is potentially dangerous for the economy . Ghanaians must be encouraged to develop interest in investing in the Stock Market. Government should launch a massive public education campaign to raise awareness and sensitize Ghanaians about the potential benefits of investing in the Stock Market, as opposed to investing in short term money market instruments like treasury bills, certificates of deposits , and low yielding savings accounts . Can you imagine the possibilities if millions of Ghanaians, already doing business in the largely unregulated and untaxed, but huge informal sector, started investing in the Accra bourse ???

The private equity market in Ghana is still in its infancy . Even though the Ghana Stock Exchange is doing well compared to other emerging markets , there is still a lot of room for re-engineering and re-packaging , if it is to be attractive to the average Ghanaian. For starters , the Exchange has to increase its listings (right now only 30 companies are listed in the bourse , thus making its total market capitalization of around 90,000 billion cedis very miniscule. It also needs to attract more Government divestitures and improve efficiency and transparency through full automation of its trading platform.

Another issue of great concern is internal revenue mobilization. We all understand that , we cannot tax ourselves into growth, but every working Ghanaian must satisfy his/her tax obligations, and contribute their fair share towards national development through taxes. The present situation where only 1.5 million Ghanaians out of an estimated 20 million, pay taxes, is not only unfair and discriminatory, but it is also untenable and unsustainable!!! More prudent measures should be put in place to widen the tax net to include the millions in the informal sector, who pay little or no tax at all!!! Obviously the Tax Stamp and the Vehicle Income Tax, is not getting the job done .

At any rate , why must businesses be given awards for honoring their tax obligations ?? That is what they are supposed to do. Indeed, failure to pay corporate taxes or any other taxes is a punishable crime , according to the tax laws of the country !! . We should not only improve revenue collection in the country, but also ensure more transparency and accountability in the Public Finance Management of the economy, and eliminate or at least , reduce the waste , fraud and abuse in the tax collection apparatus. We applaud the Controller and Accountant General's recent efforts to weed out ghost names from the Government payroll, and hope that the new IPPD2 works more efficiently to inject some sanity into the system. When we set our house in order , then we can look outside to attract investments, not only from foreign investors, but also from Ghanaians in the Diaspora. Ghanaians who have checked out ( in the Diaspora ) , must be encouraged to check back in , not only with their acquired talents but also with their treasure .

It is a mistake to ignore or marginalize the contributions of Ghanaians abroad. As an economic nationalist , I quit believing long time ago that , foreigners will have an appetite to develop our country for us . This has never happened in human history !!

The only people who SHOULD , who WILL and who CAN develop Ghana are Ghanaians themselves. The country belongs to US and nobody else !!!

In this regard, Ghanaians in the Diaspora must not be overlooked . Last year, this group of Ghanaians contributed $3billion as remittances back home, which is more than enough to bridge the funding gap in our budget!! - and this is just their discretionary income sent to relatives and family members at home. This figure is projected to hit $8 billion at the end of 2006 , according to the President.

Can you imagine the possibilities if a majority of the estimated 5million working Ghanaians abroad , each invested a minimum of $1000 .00 in some public-private initiative ?? A lot of Ghanaians can indeed invest more than a $1000.00

It is entirely possible to raise $5billion easily !!. This will help reduce the nation’s crippling dependence on foreign donors . This is not a novel idea. Progressive developing countries like Brazil , Israel and South Korea have similar programs !! Our future economic viability or indeed the attainment of the M illenium Development Goals cannot be achieved only on aid !!!!

If we could only appeal to their sense of patriotism and ensure reasonable return on their investment, we can tap into this resource base, and ensure a regular flow of investment dollars from Ghanaians abroad!!

Government needs to put in place, a legal and regulatory framework that would make investments attractive in Ghana. Such measures should include establishing a one-stop shop for investors coming to the country (The Ghana Investment Promotion Council must be revamped and adequately funded), institutions of government must be working to ensure a free-market environment, tax holidays and other exemptions for start-up companies , rule of law, reasonable repatriation of profits, and more importantly, peace and political stability in the country. Ghana might be ranked ninth in the world for doing business but there will be no payoff if the above enabling conditions do not exist in the country . No investor will put his money in a country of mayhem and lawlessness, a country of coups and rumors of coups!!!

Given the strict conditionalities imposed by the IMF and other donor agencies , it is a travesty that we continue to let this opportunity go untapped.!! I would argue with all certainty and assurance that , if Government would come out with a bold and coherent set of proposals that will speak to the reality of Ghanaians abroad , it will entice them to come home and invest .This will open the floodgates and create a rising tide that will lift all boats. !!! The simple fact is that , Ghanaians abroad collectively have more disposable income than their compatriots at home .


The broader challenge is to maintain the sound macro-economic framework we have now, maximize internally generated revenue, create a conducive investment climate in the country, for local investors, foreign investors including Ghanaians in the Diaspora, maintain political stability and democratic accountability in our body politik. This is the unvarnished truth !! With a current population growth of 2.6% per annum , our economy would have to grow at a 8 or 9% clip not the present 5.8%, in order to have any chance of becoming a middle income country by 2015 !!

We should also make creative use of our sovereign B+ rating on the international equity market to raise capital on very good concessionary basis, and be able to invest in the more productive sectors of the economy to increase productivity and spread wealth and opportunity to the poor , under-privileged and vulnerable in our society .

The key here is to stay disciplined and not be promiscuous in our borrowing, in order not to fall back into indebtedness . We need to continue to build resiliency in the economic infrastructure of the country .

We will not have another round of debt cancellation anytime soon !!!

There is no doubt that an economic renaissance is on the horizon in Ghana .The economy has now entered into a sustainable recovery , after more than two decades of stagnation . This is very remarkable , and as time melts down towards Election ’08, we have a window of opportunity in 2007 and beyond to reach critical mass, and achieve the objectives outlined in the Growth and Poverty Reduction Strategy II (GPRSII).

Kofi Asamoa–Baah
Atlanta , Georgia , USA .

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.

Columnist: Asamoa–Baah, Kofi