Ghana takes steps to avoid oil curse
The 'model' West African nation of Ghana last week announced a five-year road map to make sure the economy is not overly dependent on oil, but the policy papers are short on details.
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The basic goals of the policy were a positive step forward, as they struck a balance between the focus of state intervention of the Nkrumah years and the economic and trade liberalization, says John Kwakye, senior economist at the Institute of Economic Affairs in Accra. He adds that that liberalization was fostered by the World Bank and the International Monetary Fund after Ghana was deemed a "highly indebted poor country" during the 1980s.Skip to next paragraph
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He said that throughout the past 25 years successive governments had not given industry and the manufacturing sector enough attention.
“During the 1960s Ghana was leading industrial development in Africa,” says Dr. Kwakye.
“After independence, the government set up a whole host of industries to make the country self-sufficient and less dependent on imports,” he says, referring to the more than 50 state owned and operated enterprises that were established during Nkrumah’s rule – many of which collapsed due to financial mismanagement and lack of productivity or were closed during the economic liberalization that occurred under the rule of Jerry Rawlings in the 1980s.
But Kwakye was equally critical of the economic liberalization of the past two decades in which he argues that Ghana was encouraged to focus on areas where it was seen to have a competitive advantage – agriculture and mining – at the expense of its fading manufacturing sector.
Service sector now dominates
Ghana’s economy has undergone significant changes in recent years with the growth of banking and telecommunications sectors.
According to figures released by the Ghana Statistical Service last year, the services sector now dominates Ghana’s economy, generating 51 percent of the nation’s gross national income, followed by agriculture with 31 percent and the industrial and mining sectors with 18 percent.
But Kwakye says that the dominance of the services sector was not necessarily a positive step forward for Ghana’s development as it could make the national economy more vulnerable for the ups and downs of the financial sector.
“Without a strong industrial or agricultural base, you won’t have a strong economy that can withstand major shocks,” he says.
If implemented effectively, the new policy could strengthen Ghana’s economy, but Kwakye added that it would be many years before the West African nation could catch up to the continent’s only industrialized nation, South Africa.
“Ensuring that industries are competitive and giving them the legislative support and encouraging the building of capacity and technology and innovation is a positive step forward,” he says. “This all looks very good on paper, but I hope the implementation will be equally strong and effective.”