In January 2018, a report by the World Bank claimed Ghana is set to become the fastest-growing economy in the world in the upcoming year, with a projected GDP growth of 8.3%. This number is even more impressive if one looks at the 3.3% growth of 2016. While there is still much to be done, the country can finally count on renewed investment confidence that only two years ago would have been improbable to say the least.
There are two factors in understanding this history-making comeback. The first one looks at the renewed growth of the oil and gas sector. The resurgence of commodity exports played a significant role in switching the Ghanaian economic engine back on. Floating production storage and offloading (FSPO) units increased production, and the oil from Sankofa and TEN fields contributed to a growth of over 188%.
Nonetheless, without oil, Ghana's economy is still worth GHS43.3 billion, and this figure is growing. Moreover, although oil prices are bound to rise again, they will unlikely stabilize at the levels witnessed a couple of years ago. This leads to the second factor that is contributing to Ghana's growth and its position as a top destination for FDI.
Truth is, policy matters, and good policies matter even more. The country's December 2016 elections led to the transfer of political power to the New Patriotic Party, which seems to have realized the urgency, not just the need, to find alternative sources of revenue to drive growth in all parts of the country.
Capitalizing on the relative tranquil political environment and making the country an attractive place for engineers, entrepreneurs, and financiers thus became the end goal toward which the whole political class should strive. The impressive 9.3% growth in the last quarter of 2017 was a broader result of 19.3% growth in the industry sector, 5.6% in services, and 3.4% in agriculture. The bulwark of this process is represented by a comprehensive plan of industrialization that seeks to reduce the country's vulnerable dependence on the export of a few primary products and import of high-valued manufactured goods.
Transforming an ambitious target into concrete results is no easy task; however, the budgets for 2017 and 2018 have been two major steps in the right direction. In the hopes that private players will follow suit, the government drafted a record number of policy proposals and initiatives that, if closely monitored, will allow Ghana to reduce unemployment and grow its productivity at the same time. Among them, the new National Industrial Revitalization Program, with a stimulus package for industry and target to create 350,000 jobs; the National Entrepreneurship and Innovation Plan to accelerate job creation; the flagship “One District, One Factory” proposal, which aims to promote industrialization across the whole country; and the five-year Planting for Food and Jobs initiative, seeking to tap the huge potential in the agribusiness sector while ensuring food security.
While these are all much-needed and important short-term programs and policies, efforts should be made in setting up a permanent legal framework to ensure the viability of public-private partnerships in the long run. Only an attractive tax scheme and prospects of operational freedom will bring firms to deploy vast quantities of capital and human resources. Additionally, business-friendly legal frameworks will continue attracting foreign investors and businesses.
Though, the government would be wise to balance protecting local labor and opening up to foreign competition. These large industrial developments will raise a crucial trade question, as they will take time to achieve the economies of scale of their foreign competitors and reach sustainable profitability.
Hopes are high in Ghana as the country sets out to realize its growth potential through its diversification endeavors. ✖