In a few short years Ghana has gone from one of Africa’s fastest-growing economies to a laggard – making the case for economic diversity all the more urgent.
Between 2000 and last year it enjoyed an average economic growth rate of about 7.5 per cent, according to Trading Economics; this year the government forecasts the rate to be 3.9 per cent, its slowest annual pace in 20 years. Much of this has to do with the fall in price of its main commodity exports – gold, oil and cocoa. Last year, gold revenue alone fell 17 per cent to US$4 billion, from $4.8bn the previous year, according to Reuters.
“We were anticipating a sharp slowdown in growth,” says Yvonne Mhango, a Johannesburg-based economist at Renaissance Capital. The government’s 2015 GDP growth forecast is lower than the average for sub-Saharan Africa. This will make it difficult for it to implement economic diversity plans.
“The government has pledged to implement an essentially austere fiscal policy. We should see a further squeeze on economic activity,” Ms Mhango says.
This woeful position is partly a result in the price collapse of commodities. However, a lack of electricity is also to blame. Blackouts lasting days have forced businesses to use diesel generators, or simply shut their doors.
On a good day the country of 25 million people manages to generate just over 2,000 megawatts; in contrast the Abu Dhabi Water & Electricity Company puts out more than 10,000MW, for 2.2 million people.
Not surprising then that a frantic electrification programme is underway; two years ago the Abu Dhabi National Energy Company, known as Taqa, inaugurated the Takoradi 2 power plant, which when built will account for 15 per cent of Ghana’s generation capacity. Work is nearing completion on doubling the plant’s capacity to 330MW using light crude or natural gas – two items the African country has in abundant supply.
Ghana is also in talks with the Turkish firm Karpowership, to lease “powerships” – ship-mounted floating power plants. If Ghana pulls this off, it will be one of the first projects of its kind in the world. The vessels will be capable of generating up to 225MW each.
Still, it is going to take a lot more investment. To this end the IMF agreed in April to lend Ghana nearly $1bn to help balance its budget and fund development projects. The government will also have to convince investors that it has the will to maintain fiscal discipline.
Ghana “lost fiscal discipline”, says Kojo Addae-Mensah, the chief executive of Databank Group, an investment bank.
“We have to get fiscal discipline into shape. The will is there. If it wasn’t, the government wouldn’t have signed the IMF agreement in an election year.
“‘Big brother’ has been brought on board to ensure they do what they said they’ll do.”
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