Wednesday, January 27, 2016

Ghana's Boom Bursts

In Ghana workers marching through the capital and other cities were showing their dismay at recent price hikes and taxes, which have increased the cost of electricity by 59%, water by 67% and fuel by 28%. At the end of last year, inflation in Ghana was running at 17.7%.  “We are drumming home our concerns generally,” says Kofi Asamoah, secretary general of the Trade Union Congress, “to let the public and government know how serious we are.”

Ebenezer Pabi, a warehouse keeper at an import company for 17 years, says prices are making life in the West African country very difficult.  “The government is raising things and the living standard in Ghana is hard. Money is not flowing in the system and it is a problem. It is difficult. When my child got sick and we went to the hospital, the bill was high and even the school fees have increased – it is too much. We want the government to see how we, as workers, are suffering.” the 39-year-old father of two explains.

Once an African success story built on gold, oil and cocoa, Ghana leveraged its natural resources to produce strong economic growth in the early years of this century. It met the millennium development goal of halving poverty rates by 2015, and was hailed as a model of political stability after peaceful elections. But plummeting global commodity prices have pummelled Ghana’s economy. Export revenues for oil, gold and cocoa declined from $8.2bn (£5.8bn) between January and September 2014 to $5.8bn a year later. Add to this a three-year electricity crisis, rising public spending and debts of 90bn cedis (£16bn) – giving Ghana a debt-to-gross domestic product ratio of more than 70% – and it is clear why one of Africa’s most stable countries is in trouble. The mounting debt levels led the International Monetary Fund to introduce a $918m three-year assistance programme in April. A third payment of $114.6m was given this month and the IMF said Ghana must rein in spending to reduce debt. The cedi lost 18.75% in value against the dollar in 2015 and its decline, along with the introduction of a capital gains tax on all listed securities on the Ghana stock exchange, has seen foreign investor interest wane.

Geoffrey Maison, analyst at investment bank Cal Brokers in Accra pointed out “A lot of foreign investors pulled out of the stock market and a lot of people are now moving toward government of Ghana securities and away from the stock market. With revenues going down, we expect the government will come back to the market to borrow. If they are borrowing like they borrowed last year, we can expect interest rate levels to go up and inflation will be affected.”

The public’s anger at higher prices has been stoked by a perception that the government is mishandling the economic downturn, and mismanaging public finances. A 2015 Transparency International study on perceptions of perceptions of corruption in Africa ranked Ghana second worst, behind South Africa. In October seven high court judges were suspended amid bribery allegations. The transport minister was forced to resign in December after it emerged the government spent 3.6m cedis painting pictures of President John Mahama and former leaders on buses. Mahama’s government, which will go head-to-head with the National Patriotic party in November, has been criticised for lavishly rewarding government officials with houses, cars and fuel in addition to generous salaries.

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