December 13, 2017//-The French President, Emmanuel Macron, made a two day visit to Ghana as the third and final stop of his mini Africa tour, which took him to Burkina Faso (le pays des hommes intègres) and to Côte d’Ivoire where he attended the 5th EU-AU Summit and launched the flagship ‘Métro d’Abidjan’ project, alongside his Ivorian counterpart, Alassane Ouattara.
It should be noted that President Macron is the first French President to set foot on Ghanaian soil in the country’s 60 year post-independence history.
The most significant highlight of President Macron’s visit to Ghana was President Nana Addo Dankwa Akufo-Addo’s statement at the Joint Press Conference that was held between the two heads of state on November 30, 2017. Responding to a question from a journalist about how Ghana intends to use aid from France and the European Union for its development, President Nana Addo said emphatically that it was (about) time for Africa to take its destiny in its own hands, to finance its basic needs of health and education and stop depending on aid from the West, from the European Union and/or from France.
As expected, President Nana Addo’s statement was viewed and shared by millions on the social media. He received praises from all over the world for this ‘Afroptimistic’ and ‘Africa- yes we can do it’ statement.
Even President Macron, who was left spell-bound, told the audience that if they had any doubts that leadership was changing in Africa, they now had evidence- from leaders such as Nana Akufo-Addo. It can (therefore) be said, with confidence that we are in the ‘New’ Ghana.
So, what do we know about the ‘New’ Ghana?
After losing two presidential elections (in 2008 and 2012) to the National Democratic Party (NDC), President Nana Akufo-Addo of the New Patriotic Party (NPP) won the December 2016 Presidential elections by an almost 10% margin ( 54% for the NPP Vs 44% for the NDC).
The NPP’s government’s priorities include boosting economic growth and industrialization (One district, one factory program) and increasing the levels of scholarization (Free Senior High School program), amongst others.
In just the past three weeks, Ghana has hosted the President of France Emmanuel Macron, President of Germany, Frank-Walter Steinmeier, President of Rwanda, Paul Kagame, Prime Minister of the Netherlands, Mark Rutte, Prime Minister of Italy Paolo Gentiloni, and Queen Margrethe II of Denmark. These leaders came with hundreds of private sector leaders to explore business opportunities in Ghana.
The ‘New’ Ghana is therefore projecting itself as an open, stable and business-friendly economy and this appears to be yielding some fruits.
In March 2017, Air France launched direct flights between Kotoka International Airport and Charles de Gaulles in Paris. The Hungarian Embassy in Accra was also reopened after more than 30 years.
What has changed in the macroeconomic situation in the ‘New’ Ghana?
After years of double digit growth in 2010 and 2011 owing to the discovery of oil, Ghana faced serious macroeconomic challenges starting in 2014.
With the significant dip in the prices of commodities (oil, cocoa, coffee and gold) which are principal sources of revenue for the country, the economy was in somewhat dire straits. The Ghanaian cedi lost almost 30% of its value in 2015.
The budget deficit widened to about 10% of GDP and external reserves dropped to just about USD 4 billion in 2015. Debt as ratio of GDP also rose to about 72%, crossing the theoretical 70% ‘red’ threshold. It is important to note that Ghana signed an Extended Credit Facility (ECF) with the International Monetary Fund (IMF) in 2015 for a total of USD 918 million to help in fiscal consolidation and overall macroeconomic stability.
Starting in January 2017, the Government of Ghana launched the Akufo – Addo Plan for Economic Transformation (AAPET). One key element of this plan is the massive reduction in foreign currency borrowing. Prior to 2016, Ghana issued 5 Eurobonds (for a total of USD 2, 3 billion).
Reducing the appetite for foreign currency borrowing has brought down the debt to GDP ratio- which is expected to get to about 62% by the end of the year. The budget deficit is also down to about 6% of GDP. External reserves have risen to circa USD 7.5 billion and the imports cover has risen to 4.2 months. The macroeconomic situation therefore appears to have markedly improved and is still improving.
So…what needs to be done to consolidate the gains?
First, the government needs to step up efforts to foster private sector development. It recently announced the imminent creation of a National Development Bank (with a USD 500 million capital base), that will provide subsidized loans to SMEs, the backbone of the Ghanaian private sector
. The inauguration by President Nana Akufo-Addo of the new headquarters of Zenith bank in November 2017 is a strong signal that the government is committed to private sector development. Ghana ranked 120th, out of 190 countries, in the latest World Bank Doing Business rankings.
It moved from 70th in 2015 to 114th in 2016, an indication that more needs to be done in the area of investment and business climate reforms.
African countries have accounted for over 30% of all business reforms implemented in the last decade, with countries such as Mauritius, Rwanda, Morocco and Seychelles leading the pack. Nigeria moved 25 places this year and Kenya has moved 30 places in the last 3 years. (The ‘New’) Ghana can definitely do it too!
Second, the country should continue its openness policy. As aforementioned, Heads of States and Government of major OECD (industrialized) countries have visited Ghana just in the past three weeks (France, Germany, Italy, Netherlands, and Denmark). This is a very good sign and it is a clear vote of confidence in the leadership of the country by the external partners.
It shows the world that Ghana is an ideal place to do business. Kenya banked on its openness and it paid off. Just between May 28 and July 15, 2016, Kenya hosted the Presidents and Prime Ministers of South Korea, Turkey, Ethiopia, Israel and India.
In the same year, it moved over 20 places in the World Bank Doing business rankings. (The ‘New’) Ghana can surely also do this!
Indeed, so far so good for the ‘New’ Ghana. There are signs of very bright days ahead. But… (Only) time will tell…
By John Mbu, Economic and Policy Analyst at African Development Bank
