In the graduation ceremony the President?s speech urged the new gradates to establish their own businesses instead of joining the unemployment lines. He reminded them that their training has not only equipped them for such challenges, but the existence of credit facilities have made it more attractive so to do. To the request of delegation of the delegation from the Central Region for the government to establish manufacturing factory in their community the President reiterated that this Administration is not in a business of establishing and running businesses.
To an administration that is doggedly committed to use free and private enterprise as the engine for development and growth, the speeches were pertinent. But is that all that is needed? Urgings, unequivocal and unambiguous statements only cannot cut it. For this dream to become a reality, i.e. using free enterprise and private property to develop the nation it needs relatively simple and necessary course of actions. The actions need not only inspire and motivate Ghanaians but they should make it easier and fair to invest. Ignoring that would represent a catastrophic failure of leadership. For in our culture, for far too long, we prize more hot air and value lot less actions and policies.
About 50 years ago, Kwame Nkrumah, the then Prime Minister, correctly diagnosed the ills of Ghanaian owned businesses: lack of credit. Being dogmatically socialist, he did not prescribe the needed medication. He rather, as should be expected, resorted to state capitalism or socialism as the means of development and growth. Like most of the political elites of his era, he squandered the country?s wealth and choked its productivity. Huge loss making industrialization projects were undertaken, which shackled the economy and choked productivity. The rest is history. The country got a new chance when the Progress Party under the leadership of Busia was voted into power.
The Busia administration established Small Business Loan Administration to fund the acquisition of businesses of aliens who were targeted for deportation as dictated by the Aliens Compliance Act. As a disciple of free enterprise and private initiative, the PP Administration also introduced Student Loan Scheme. It was an effort to wean Ghanaians then of the socialist mentality that the Nkrumah regime have inculcated. These policies did not have time to germinate. Kutu aborted the gestation period.
One of the first things Kutu did was to cancel the Student Loan Scheme in order to curry favor from the student body which was very critical of Busia regime. Busia regime had failed to compliance with the sections of their owned authored Constitution of the Second Republic
A section of the Constitution obligated elected officers to declare their assets on assumption of office. The constitution was silent on a timeline. It was perceived by the students that the delay in declaring assets was tactical. It gave the ?big men? of the government an opportunity ?grab and carry? assets in the interim. The student leadership protested. They were pilloried. Kutu found in the students natural allies. Thus his cancellation of the loans that some of them had taken for their education.
Acheampong also unleashed the ?yentua? revolution. The government unilaterally cancelled some of its external debts which were reported to be tainted with corruption. Ghanaians, who had taken up loans from the Small Business Administration, took a cue. If loans of students could be written off by the stroke the pen and with quixotic theatrics a nation could refuse to pay its loan, why bother to pay private loans. Kutu?s era also saw the whole country being turned into a glorified flea market. Everything, I mean everything, was tradable. There was no production. The economy stagnated.
Hilla Limann?s Administration, ephemeral that it was, could not change the direction of the economy. Rawlings emerged from the wood works again to stamp its mark on Ghana?s economy. Rawlings initially continued with Nkrumah?s socialist nonsense. Domestic and international events forced him to adapt his policies. It is only an insane person who does not change when circumstances change. He genuflected before the altar of the International Monetary Fund and the IMF.
With the combined failures of tentative initial socialist steps and the still-birth of government funded private enterprise of the first 20 years of Ghana?s independence, the country?s economy lost direction. Rawlings had no leverage. He could not do much because under his watch the World Bank and International Monetary Fund (IMF) have become the fairy god parents of Ghana and many of other African countries.
The lessons learned. Contrary to what the hypnotized votaries of socialist ideology tell us, no nation on earth has developed by means of that economic philosophy. Socialism does not produce. It is even an inefficient means of redistributing wealth. It is not surprising therefore, that the Labor Party of UK never mentions that word any more. India like Ghana closed its domestic economy to foreign participation and is now zealously using private enterprise to develop and grow its economy. The case of China, the ?new economic kid? is additional poignant examples of effectiveness of private enterprise. The magic of that system turns sand into gold. All these examples illustrate that the key to development lies in a dynamic private sector. For a country to produce more, private individuals must generate savings and plow those savings back into the production process in the form of new and improved techniques, processes and products.
Given that incomes are low in Ghana in addition to our low propensity to save; these features make it impracticable for the average Ghanaian to save. This is where the government should come in to streamline availability of credit to Ghanaian budding entrepreneurs. The government must not only blow hot air. It must walk the walk.
Recommendations. Credit should not be given on the basis on who one knows. A distinctive feature of the ill-fated Small Business Loan Scheme initiated by PP regime was that, party membership and ethnic origin of applicants weighed more than the economic soundness of business plans. Soundness of business plans should only be the criterion for granting loans.
Government should pass a law to make it not only possible but profitable for commercial banks to give loans to businesses. The government should guarantee such loans. That is the system operating here in USA Small Business Administration and the commercial banks fund student loans. If the national government guarantees such loans, the cost of borrowing will be lower to the borrower; the commercial banks would be taking less risk.
Disbursements of loans, thus guaranteed, should not be made directly to the applicant. It should be made to suppliers. For example if an applicant, in his/her business plan needs to pay for rent, the check should be made directly to the land lord with the requisite contract attached. Acquisition of other assets should similarly be funded.
Commercial banks should also be entitled by law to have ex-officio representative on the board of directors of such corporation so funded. Lastly, the academic and professional certificates of all board members must be surrounded to the bank while the loan is outstanding.
Conclusion Urgings, cajoling and entreaties may have their places. They are not now. We have our won accumulated experiences and that of the globe to guide us. Contrary to the dogmatists would continue to say socialism does not cut it. Nkrumah tried it. It was tried in the Soviet Union and Eastern Europe. China has jettisoned it. Stay the course. The peasant cocoa farmer did not produce more than half the globe?s consumption of the cocoa in a socialist environment. The Ghanaian entrepreneur needs credit. He wants to believe that he would not be discriminated against because of his ethnic origin or the high school he attended. Make credit fairly available solely on the basis of risk and profitability and he would rise to the occasion. We do not culture of paying loans. That is a weakness. This weakness is recognized. We have some strengths though.
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