Ghana - iuj.ac.jp · Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park,

COUNTRY PROFILE

GhanaOur quarterly Country Report on Ghana analysescurrent trends. This annual Country Profile providesbackground economic and political information.

1998-99The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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ISSN 0269-4549

Comparative economic indicators, 1997

0 2 4 6 8 10 12

Nigeria

Côte d'Ivoire

Ghana

Senegal

Guinea

Mali

Burkina Faso

Benin

Niger

Togo

Mauritania

The Gambia

Guinea-Bissau

Gross domestic product$ bn

Source: EIU estimates.

29.229.229.229.229.229.229.229.229.2

0 100 200 300 400 500 600 700

Côte d'Ivoire

Guinea

Senegal

Mauritania

Ghana

Benin

Togo

The Gambia

Nigeria

Mali

Guinea-Bissau

Burkina Faso

Niger

Gross domestic product per head$

Source: EIU estimates.

0 1 2 3 4 5 6 7

Burkina Faso

Mali

Guinea-Bissau

Côte d'Ivoire

Ghana

Mauritania

Guinea

Togo

Niger

Nigeria

The Gambia

Senegal

Benin

Gross domestic product% change, year on year

Sources: EIU estimates; national sources.

-5 0 5 10 15 20 25 30

Ghana

Guinea-Bissau

Nigeria

Côte d'Ivoire

Mauritania

Benin

Togo

Niger

The Gambia

Guinea

Burkina Faso

Senegal

Mali

Consumer prices% change, year on year

Sources: EIU estimates; national sources.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998

June 25th 1998 Contents

3 Basic data

4 Political background4 Historical background8 Constitution and institutions9 Political forces

10 International relations and defence

11 The economy11 Economic structure12 Economic policy14 Economic performance15 Regional trends

16 Resources16 Population16 Education17 Health18 Natural resources and the environment

19 Economic infrastructure19 Transport and communications20 Energy provision21 Financial services

23 Production23 Manufacturing24 Mining and semi-processing25 Agriculture and forestry

27 The external sector27 Merchandise trade29 Invisibles and the current account30 Capital flows and foreign debt31 Foreign reserves and the exchange rate

32 Appendices32 Regional organisations42 Sources of information44 Reference tables44 Government finances44 Money supply44 Interest rates45 Gross domestic product45 Gross domestic product by expenditure46 Gross domestic product by sector46 Price indices

1

© The Economist Intelligence Unit Limited 1998 EIU Country Profile 1998-99

46 Population and labour force47 Transport statistics47 Stockmarket indicators48 Manufacturing production48 Minerals production48 Production of selected food crops49 Exports49 Main trading partners50 Balance of payments, IMF estimates50 Balance of payments, national estimates51 External debt, World Bank estimates51 Net official development assistance52 Foreign reserves52 Exchange rates

2


Ghana

Basic data

Land area 238,537 sq km

Population 18.5m (mid-1997 EIU estimate)

Main towns Population in ’000 (1988, national estimates)

Accra (capital) 972Tema 440Kumasi 206

Climate Tropical

Weather in Accra(altitude 27 metres)

Hottest months, March, April, 23-31°C; coldest month, August, 22-27°C; driestmonth, January, 15 mm average rainfall; wettest month, June, 178 mm averagerainfall

Languages English (official), Ewe, Fante, Ga, Hausa, Twi

Measures Metric system

Currency Cedi (C)=100 pesewas. Average exchange rate in 1997: C2,050:$1. Exchangerate on June 19th 1998: C2,320.0:$1

Time GMT

Holidays January 1st, January 7th, March 6th (Independence), Good Friday,Easter Monday, May 1st, July 1st, December 25th-26th

Ghana: Basic data 3


Political background

Ghana is a unitary republic with a multiparty democratic system. The NationalDemocratic Congress (NDC) won the democratic elections in both 1992 and1996, having already ruled the country for over a decade following a militarycoup in 1981. The NDC’s charismatic leader, Jerry Rawlings, is constitutionallybarred from contending the 2000 presidential election and the vice-president,John Atta Mills, is expected to stand in his place.

Historical background

Early history Ghana’s history is better documented than that of most countries in Sub-Saharan Africa, because of the area’s early importance in regional and inter-continental trading networks. The Akan, the largest ethnic group in present-day Ghana, have predominated since at least 1400, when chiefs based in thecentral forest supplied kola nuts and gold to the trans-Saharan caravan trade tothe north. By 1700 several chiefs from the forest had subdued their rivals withguns bartered from European coastal traders and established the Ashanti king-dom. They built a highly organised hierarchical political system of remarkablemilitary strength, which extended Ashanti control over all forest routes to thecoast, and with it the supply of slaves and gold.

The coast, named the Gold Coast by Portuguese gold traders a century earlier,was dominated by a different Akan subgroup of Fante-speaking peoples. Anestimated 1m people were channelled into the slave trade, a regional traditionthat was internationalised by Dutch traders but brought to its zenith by theBritish in the 18th century.

The British came as traders. However, in the late 19th century Anglo-Frenchrivalry brought a shift in favour of territorial acquisition. During the scramblefor Africa, Britain invaded the Ashanti kingdom in 1874 and declared the GoldCoast a British colony, which, after a struggle, it controlled by 1901.

The British opted for a colonial economy based on peasant cash-crop prod-uction, mainly of cocoa, and on gold mining, controlled by foreign interests.Farmers’ initiatives and local familiarity with international trade brought rela-tive prosperity. The Gold Coast became one of Africa’s most successful colonialeconomies.

The earliest political movements were dominated by lawyers and other edu-cated elites who had been excluded from politics by the colonial state. After thesecond world war other social groups also became involved. The newer recruitswanted more jobs in the administration and business opportunities in thecolonial system. By 1949 nationalists split into moderates and radicals, thelatter supporting Kwame Nkrumah’s Convention People’s Party (CPP). Backedmainly by young people and poorer sections of the middle class, the CPP wonelections and in 1957 made Ghana the first country to gain post-colonialindependence in Sub-Saharan Africa.

4 Ghana: Historical background


The causes ofpost-independence

instability

Ghana experienced nine changes of government including four military coupsbetween 1957 and 1983, but has escaped the violence that afflicted many otherAfrican countries. For the most part, economic management and the distrib-ution of resources between interest groups have been the commonest sourcesof dissatisfaction. In contrast to much of Africa, ethnicity has played a rela-tively minor role in mainstream political conflicts.

The Socialist CPP The CPP government was ostensibly socialist, with a mainly southern, urban-based constituency. The CPP laid much of the basis of Ghana’s present indus-trial infrastructure but its policies alienated cocoa farmers and influentialprivate-sector businesses. It introduced a one-party state in 1964 and becamecorrupt and intolerant of criticism.

The NLC and PP: attemptsat structural adjustment

In 1966 an economic crisis and rumours of cuts in the military’s resourcesprompted Ghana’s first (bloodless) military coup, by conservative generals,who formed the National Liberation Council (NLC). The NLC raised cocoaproducer prices, devalued the currency and sought to clear up corruption,before holding elections and handing over to the laisser-faire Progress Party(PP) after elections in 1969. The PP continued the NLC’s economic reforms.However, a fresh economic crisis—and PP efforts to rectify it with a toughbudget and devaluation—brought another military coup in January 1972.

The NRC: a descent intokleptocracy

The younger left-wing colonels of the National Redemption Council (NRC), ledby Ignatius Acheampong, reversed the PP’s policies in favour of socialist pro-grammes but these dragged the economy to new lows and corruption wasraised to unprecedented levels. In the late 1970s Mr Acheampong was removedby other defence chiefs who favoured a return to civilian rule.

The 1979 and 1981 coups Before elections could be held, younger officers and other ranks staged a freshcoup after forming the Armed Forces Revolutionary Council (AFRC), led by theinstantly popular 28-year-old Flight Lieutenant Jerry Rawlings. The left-leaningAFRC set itself the limited mission of “house cleaning” (flushing outcorruption) and handing over to civilian rule, which it duly did in September1979, to the People’s National Party (PNP) under the Third Republic. The PNPfailed to deliver either a better economy or clean government and the soldierswho had once led the AFRC staged a further coup, in December 1981, and thistime remained in power for ten years.

The PNDC: a militarytechnocratic regime

The new Provisional National Defence Council (PNDC) government was in-itially radical and socialist in complexion. It was supported by students, work-ers and many more groups of Ghanaians sickened by corruption and economicmismanagement. Dismissing party-based politics as corrupt and divisive, itlaunched a military technocratic regime, under which Mr Rawlings and othermilitary figures focused on domestic security and on rooting out corruption,while “experts” ran the economy.

Socialist rhetoric andfree-market reform

The regime had been in power only a few years when Ghana suffered severedrought. Desperate for hard currency, some PNDC members sought a deal withthe IMF. This set off an internal struggle won by the pro-reformers, and the

Ghana: Historical background 5


radicals went into silent opposition. While continuing to espouse socialist andanti-imperialist rhetoric, the PNDC went on to implement one of Africa’s firstand longest-sustained structural adjustment programmes (SAP). This stabilisedthe economy and brought several years of growth but inevitably alienated thePNDC’s erstwhile allies. In their silent dissent they joined other, mainlymiddle-class groups resentful of the PNDC.

After 1985 the PNDC identified a fresh constituency: Ghana’s impoverishedrural areas, which had been neglected by all previous governments. Althoughthe government’s concern was genuine, its new focus also coincided withchanges in donor priorities, which emphasised revival of the agricultural sec-tor, the removal of urban and industrial subsidies and, on the political front, areturn to multiparty democracy.

In the late 1980s Mr Rawlings launched “partyless” local elections in line withhis conviction that parties were incapable of looking holistically at thecountry’s interests. These were intended to pave the way for a national systemof partyless democracy but the idea was shelved in response to bilateral donors’demands for multiparty reform.

The 1992 elections In November 1992 the PNDC held Ghana’s first multiparty elections for morethan a decade. Five candidates stood for president, while six parties entered theparliamentary election, including the National Democratic Congress (NDC),the new face of the PNDC. In general, the elections were free and fair, and wereendorsed by international observers. However, the opposition did suffer disad-vantages, as the late registration of parties had deprived them of time to organise.

The NDC saw its main rivals in the Nkrumahists, whose support base was inurban areas. To divide them it set up its own Nkrumahist party, the NationalConvention Party (NCP). The introduction of the People’s National Convention(PNC), set up by the late Hilla Limann, caused further splits. The NDC’s otherstrategy focused on marginal urban areas, where it gave pay rises to public-sectorworkers.

Mr Rawlings won the presidential race, with 58% of the vote, compared with30% for his nearest rival, Professor Albert Adu Boahen of the New PatrioticParty (NPP). The opposition claimed fraud and boycotted the December parlia-mentary election. However, analysts believe that Mr Rawlings won because hewas able to claim—with some justification—the credit for Ghana’s economicturnaround, and because he was more charismatic than Professor Adu Boahen.

The results left the NDC with complete control of parliament, which rarelychallenged the executive. The opposition parties, excluded from the legislatureby their own boycott, tried to strengthen their influence through other chan-nels. The NPP used its many lawyers in the judiciary to challenge the govern-ment on constitutional issues. Most of the opposition Nkrumahists regroupedinto the People’s Convention Party (PCP), in a bid to restore the movement’scredibility after the fractures during 1991-92. The PNC decided to go it alone,and the NCP’s pro-government Nkrumahists joined the NDC.

The 1996 elections The 1996 elections seemed to offer the prospect of a close contest. The NPP andPCP formed an alliance to field a single presidential candidate, John Kuffour,

6 Ghana: Historical background


and a single candidate in each constituency, believing that this demonstrationof unity would be enough to unseat the government. The PNC fielded a thirdpresidential candidate, Edward Mahama.

However, the president and the NDC fought a well-organised campaign thatstressed the government’s track record on spending and infrastructural devel-opment, while capitalising on its control of the state-owned media and struc-tures of patronage. It also undermined the opposition by co-opting many PCPofficials and candidates to the NDC fold.

Ultimately, therefore, neither the opposition’s strategy nor the higher turnout(75% of eligible voters compared with 48% in 1992) made much material differ-ence in the presidential election. Mr Rawlings won a majority in every regionexcept Ashanti—the NPP’s heartland. In addition, in a near repeat of 1992, hegained 57.5% of the vote. Mr Kuffour received 39.5% and Mr Mahama 3%.

In the legislative poll and subsequent run-offs, the opposition won 67 seats,compared with 11 in 1992, but this still left the NDC with a workable majority.The NPP-PCP alliance made a strong showing in Ashanti and performed well inthe Eastern and Greater Accra regions. But the geographical base of its supportreinforced its image as a southern-based party dominated by Ashanti leaders.The results also reinforced the NDC’s position as the only grouping with anational support base.

Since 1996 the NDC has been preoccupied with factional rivalry ahead of theelections in 2000 in which Mr Rawlings cannot constitutionally stand for a thirdterm. By June 1998 the succession issue had sharply divided the party, and, in abid to minimise the damage, Mr Rawlings endorsed his popular but inexperi-enced vice-president, John Atta Mills, as his preferred successor. The nomina-tion ruled out any change to the constitution and the suggestion that the firstlady, Nana Konadu Rawlings, stand as the NDC candidate. This should easetensions within the party while enabling Mr Rawlings to retain considerableinfluence after he steps down.

Election results

1992 1996 Votes % of Votes % of

Presidential election (’000) total (’000) total

Jerry Rawlings (NDC) 2,327 58.3 Jerry Rawlings (NDC) 4,092 57.5 Professor Albert Adu Boahen (NPP) 1,213 30.4 John Kuffour (NPP) 2,807 39.5 Hilla Limann (PNC) 267 6.7 Edward Mahama (PNC) 210 3.0 Kwabena Darko (National Independence Party) 114 2.9Emmanuel Erskine (People’s Heritage Party) 68 1.7Total 3,989 100.0 7,109 100.0

Legislative election No. of seats No. of seats

National Democratic Congress (NDC) 189 National Democratic Congress (NDC) 132 National Convention Party (NCP) 8 New Patriotic Party (NPP) 61 Independents 2 People’s Convention Party (PCP) 5 Every Ghanaian Living Everywhere (EGLE) 1 People’s National Convention (PNC) 1 Total 200 199a

a Includes a subsequent re-run in one constituency, and a by-election. Another by-election pending at time of writing.

Sources: Electoral Commission, Accra; Ghanaian embassy, London.

Ghana: Historical background 7


Constitution and institutions

Constitutional changes Ghana’s first constitution at independence in 1957 was based on the UK sys-tem of multiparty parliamentary democracy. However, it was changed withinthree years when Ghana became a republic, with Kwame Nkrumah as pres-ident. In 1964 the CPP government instituted a one-party state and the 1960constitution was amended. Constitutional arrangements were further trans-formed under seven more changes of government.

The present constitution, which forms the basis for the Fourth Republic, wasestablished in 1992, when Ghana held its first multiparty elections since 1979.Much of it is based on the US system, vesting executive power in a presidentelected by universal suffrage every four years. Tenure is limited to two four-yearterms. The cabinet is appointed by the president, on approval by the legis-lature, a single-chamber parliament consisting of a minimum of 140 membersof parliament (MPs) elected on a first-past-the-post basis. Candidates can befielded by parties or stand as independents.

The absence of a real opposition and the inexperience of most NDC membersof parliament made for a rather compliant legislature during 1992-96. How-ever, opposition parties have become more vocal in parliament since the lastelections, which gave them 67 seats—enough to scrutinise legislation, press formore transparency in executive business and raise the level of parliamentarydebate.

Important recent events

November 1992: Flight Lieutenant Jerry Rawlings (retired) is elected aspresident, comfortably defeating his main rival, Professor Adu Boahen.

December 1992: The National Democratic Congress (NDC, Mr Rawlings’spolitical party) takes 189 seats out of 200 seats in parliament. Opposition partiesboycott the poll.

February 1994: Widespread Konkomba-Nanumba clashes in the north leave500 dead.

November 1994: Opposition parties announce that they will field a commonpresidential candidate in the elections of November 1996.

1995-96: The NDC shows increasing signs of becoming factionalised.

December 1996: The NDC loses 57 seats in parliament, mostly to the NewPatriotic Party (NPP).

June 1998: Mr Rawlings endorses the vice-president, John Atta Mills, as hispreferred successor in the December 2000 presidential election.

8 Ghana: Constitution and institutions


Political forces

Mr Rawlings introduces athird force

Until Mr Rawlings came to dominate the political scene, Ghana had two polit-ical traditions: the Nkrumahist strand representing the socialist policies thatwere followed after independence; and the laisser-faire tradition that succeededMr Nkrumah. However, Mr Rawlings’s quest for broad-based developmentintroduced a third force into Ghanaian politics. The transition to democracyand the neutralisation of the military by Mr Rawlings have cemented the posi-tion of the National Democratic Congress (NDC) as the party associated withaid and economic reform.

Party allegiances andpolicies

The NDC’s policy of promoting broad-based development favouring rural areasis illustrated by the government’s record and the fundamental changes it hasbrought to the economy. The NDC’s support lies mainly in rural areas thathave benefited from increased investment and possibly among non-Ashantibusiness people aware of the regime’s growing commitment to expansion ofthe private sector. The 1996 election results confirmed the NDC as the onlyparty with a national base.

Although the two opposition parties are highly critical of the NDC’s short-comings, neither has come up with a clear alternative. This reflects a lack ofcoherence and, for the electorate, represents a lack of real choice. If the aidassociated with economic recovery is to continue, current policies and reformsneed to be sustained.

The People’s Convention Party (PCP) is supported by left-leaning groups, whodraw inspiration from Mr Nkrumah and the days when Ghana led Africa toindependence. Such groups include trade unions, students, academics andother educated elites. The Nkrumahists’ agenda appears to favour urban inter-

Main political figures

Jerry Rawlings: Head of state since seizing power in 1981, elected president in1992 and again in 1996.

Nana Konadu Rawlings: The president’s wife and a powerful political figure inher own right, she has been accused of factionalising the NDC.

John Kuffour: A lawyer, he stood as the Nkrumahist candidate in the December1996 presidential election.

Joseph H Mensah: A minority leader in parliament.

Professor Albert Adu Boahen: Mr Rawlings’s main opponent in the 1992poll, he remains a powerful force in the Ashanti heartlands of central Ghana.

John Atta Mills: A law professor and former head of the internal revenue servicebefore being appointed as a compromise candidate for the position ofvice-president. He has been endorsed by Mr Rawlings as his preferred successorfor the December 2000 presidential election.

Ghana: Political forces 9


ests, higher spending on health and education and looser fiscal and monetarydiscipline.

The Ashanti region is the main support base of the New Patriotic Party (NPP)and its predecessors. As the only party of business, the NPP has at times enjoyedbroader appeal. However, because many Ghanaians believe it serves Ashantibusiness interests only, wider cross-regional support is not guaranteed. Since1992 opportunism has taken the NPP leadership away from its traditional policyline. The party has exploited dissatisfaction with pay and value-added tax (VAT)to flirt with the trade unions and has endeavoured to stir up nationalist senti-ment against foreign investment by challenging the sale of shares in the AshantiGoldfields Corporation, Ghana’s main gold producer, to foreigners.

International relations and defence

Links with the East andWest

Shortly after the Provisional National Defence Council (PNDC) came to powerin 1981 its left-leaning policies enabled the party to strengthen its contactswith former Eastern bloc countries, namely the Soviet Union, Cuba and Libya.However, the PNDC quickly showed that it was willing to maintain and im-prove links with other developed countries from which it sought substantialfinancial and technical assistance, as well as with multilateral organisationssuch as the IMF and the World Bank. Relations with the US have been fraughtwith tension but have improved greatly since the beginning of the 1990s.Mr Rawlings made his first official visit to the US in early 1995 and the USpresident, Bill Clinton, visited Ghana in March 1998, on the first leg of hissix-nation tour of Africa.

Relations with Nigeria are ambiguous. In the past Nigeria’s military govern-ment had been cold towards Mr Rawlings but there were signs that the rel-ationship had improved in May 1997, when Mr Rawlings called on theCommonwealth to support Nigeria in its efforts to rejoin the organisation.There were further changes in mid-1998 when a high-ranking Nigerian officialaccused Ghana of plotting against the regime of General Sani Abacha, who hassince died. It is so far unclear how relations with Nigeria will be affected by thenew Nigerian regime. Relations with Côte d’Ivoire and Togo were uneasythroughout much of the 1980s as both countries played host to Ghanaianopposition movements. Since the mid-1990s the Rawlings government has hada working, if not warm, relationship with both countries. Relations with Burk-ina Faso to the north were excellent under Thomas Sankara, a close personalfriend of Mr Rawlings, but Ghana was initially wary of his successor, BlaiseCompaore. Relations have since thawed, and indeed, relations with manyregional neighbours have improved since Ghana’s transition to democracy.Mr Rawlings’s chairmanship of the Economic Community of West AfricanStates (Ecowas; see Regional organisations) for the 12 months to July 1995further enhanced Ghana’s standing in the region.

10 Ghana: International relations and defence


The economy

Economic structure

Main economic indicators, 1997

Real GDP growth (%) 5.1a/3.0b

Consumer price inflation (av; %) 27.8

Current-account balance ($ m) –436

Total external debt ($ m) 6,405

Exchange rate (av; C:$) 2,050

Population (m) 18.50

a Government estimate. b IMF estimate.

Source: EIU.

Agriculture is themainstay of the economy

Agriculture continues to be the mainstay of Ghana’s economy, accounting for40-45% of GDP in 1992-96. Although cocoa is perhaps the country’s best-knowncrop, food crops are by far the most important contributor to agricultural outputand alone make up around 30% of GDP. The other main sector is services,largely trade and public services, which accounts for 45% of GDP. Industry’scontribution hovered at around 14% in 1992-96, led by manufacturing with 8%.(Further details on GDP by sector are given in Reference table 6.)

The National Democratic Congress (NDC) has tended to favour the rural eco-nomy more than any previous government, making a greater investment ininfrastructure and offering higher producer prices. However, agriculture—withthe exception of cocoa—has generally performed sluggishly, although growthhas picked up since 1995, to around 3.8% per year.

Recent World Bank data estimate that private consumption accounted foraround 79% of GDP in 1996, and put government consumption at 12%. Grossdomestic investment accounted for 19% in 1996. (Historical data on GDP byexpenditure are provided in Reference table 5.)

Comparative economic indicators, 1997Côte South

Ghana d’Ivoire Nigeria Africa UK

GDP ($ bn) 6.9a 10.5 30.7b 129.3 1,287.7

GDP per head ($) 372 743 286 3,411 21,839

Consumer price inflation (av; %) 27.8 4.9 29.3 8.6 2.8

Current-account balance ($ bn) –0.4 55.0 2.3 –1.7 10.0 (% of GDP) –6.3 0.5 7.5 –1.2 0.8

Merchandise exports fob ($ bn) 1.5 4.4 15.6 29.9 277.8

Merchandise imports fob ($ bn) –1.7 –2.7 –8.2 –27.7 –298.8

External debt ($ bn) 6.4 17.30 35.2 35.9 n/a

Debt-service ratio, paid (%) n/a 24.2 12.0 11.2 n/a

a EIU estimate. b Autonomous exchange rate used for conversion.

Source: EIU.

Ghana: Economic structure 11


Economic policy

The economy had greatpotential

At independence, Ghana’s economic prospects were extremely good. It was theworld’s largest producer of cocoa, it had healthy mining and timber sectors,and also, by regional standards, a relatively well-developed manufacturing sec-tor. Kwame Nkrumah’s Convention People’s Party (CPP) government soughteconomic expansion through rapid industrialisation, directed and mainlyfunded by the state, using funds derived from the cocoa sector. The programmesucceeded in establishing what industrial capacity Ghana has today, but imple-mentation was made difficult by inadequate planning and a precipitous col-lapse in the world price of cocoa. The government allowed the fiscal deficit towiden and failed to adjust the national currency, the cedi, to reflect growingcurrent-account deficits.

Recovery— The subsequent two decades were characterised by economic mismanagement,but in 1983 the government launched an Economic Recovery Programme(ERP), drawn up with guidance from the IMF and the World Bank. The firstphase, in 1983-86, focused on stabilising the economy by restoring fiscal disci-pline, restraining credit expansion and introducing realistic exchange-ratemanagement, and in 1986 the government’s accounts went into surplus for thefirst time in many years. Import licences were abolished and a foreign-exchange auction system was established.

—and reform The second phase, in 1987-88, was aimed at structural reform. While fiscal andmonetary discipline was broadly maintained, cuts were made in the civil serv-ice and the Ghana Cocoa Board. New investment codes were drawn up formining and the rest of the economy. The foreign-exchange auction system wasunified with the official rate and almost all imported goods became eligible forauction funds.

From 1989 to mid-1992 the government implemented deeper structural andinstitutional reforms. Financial-sector adjustment cleared bad loans frombanks’ balance sheets and improved regulation by the Bank of Ghana (thecentral bank). In 1990 the government set up the Accra stock exchange to laythe foundations for a domestic capital market. The foreign-exchange systemwas gradually liberalised, with the closing of the auction and its replacementwith an interbank market.

Deceleration and somebacktracking, 1992-95

Since Ghana’s return to multiparty democracy in 1992, the government hasveered between large deficits in election years and corrective fiscal policies inbetween. It has also implemented several fundamental reforms, albeit moreslowly than donors and local businesses would like. Reforms include privatis-ation, which has shed government stakes in nearly 200 enterprises.

Fiscal lapses during election years have tended to saddle the government withproblems that have proved difficult to resolve in subsequent years. Largepublic-sector pay rises in advance of the 1992 elections turned five years ofsurplus into a large deficit that helped to fuel inflation, substantially enlargedGhana’s domestic debt, and crowded out private-sector borrowing.

12 Ghana: Economic policy


Recent fiscal performance After a brief return to fiscal surpluses in 1994 and 1995, election pressuresderailed the government yet again, when overspending on vote-winning capi-tal projects, among other things, returned the 1996 accounts to a deficit ofC335bn ($204.6m). Although the finance minister, Richard Kwame Peprah,took corrective measures in 1997, imposing severe cuts in capital spending anda tight lid on most recurrent outlays, these failed to deliver the 1997 forecastbudget surplus of C191bn. Instead the budget recorded a provisional deficit ofC297bn caused not only by debt accumulated from the 1996 deficit but also bythe government’s maintenance of high interest rates to fight inflation, and ashortfall in revenue from sales taxes, privatisations and donor grants.Mr Peprah is now endeavouring to put public finances back on track, with atough 1998 budget, which he hopes will also woo donors into accelerating aiddisbursements.

Mr Peprah has also changed the budget format from “narrow” to “broadbased”. The latter includes external financing to give a clearer picture of therole of donor finance in fiscal operations. However, the 1998 budget is unlikelyto meet its targets. Revenue is likely to fall short as the budget assumes a 15%rate of value-added tax (VAT), while parliament approved an increase of only10%. The budget also failed to factor in the fiscal implications of a seriouselectricity crisis, which began at the end of 1997, and is not expected to abateuntil the end of 1998. (For historical data on government finances, see Refer-ence table 1.)

Government finances(C bn unless otherwise indicated)

1997 1996 Provisional Provisional 1998

Actuala Budgeta outturna Budgetb Outturnb Budgetb

Revenue 2,219 2,944 2,616 3,342 2,674 4,021 Tax revenue & grants 2,075 2,769 2,513 3,167 2,571 3,821 Divestitures 143 175 103 175 103 200

Expenditure 2,555 2,753 2,914 3,883 3,848 5,053 Recurrent 1,861 2,084 2,290 2,084 2,290 2,834 Capital 682 669 539 1,732 1,473 2,171 of which: foreign-funded – – – 1,130 934 1,432

Reduction in arrears 12 67 84 67 84 48

Overall balance –335 191 –297 –540 –1,174 –1,032

FinancingForeign (net) –195 –245 –430 486 446 576 Domestic (net) 531 54 728 54 728 456

Primary balance 34 612 459 612 460 701 % of GDP 0.3 4.5 3.4 4.5 3.4 4.0

a Narrow definition: excluding foreign-funded capital spending. b Broad definition: including foreign-funded capital spending.

Source: 1998 budget presentation.

Ghana: Economic policy 13


Economic performance

Growth remainsdependent on the public

sector

The reform programme of the National Democratic Congress (NDC) govern-ment reversed the economic decline that prevailed during the 1970s. Aftercontracting in 1973-83 GDP grew by more strongly in 1983-93, and since 1993it has averaged 4.3% annually. (See Reference table 4 for historical data on GDPgrowth.) The 1998 budget provisionally estimated growth in 1997 at more than5%. However, the IMF has estimated real GDP growth in 1997 at 3% and thecontradiction has not been resolved although the government’s figure seemshigh, given tight fiscal policies and the electricity crisis that reduced economicactivity at the end of 1997.

The recovery since the 1970s has been most marked in the main export sub-sectors. The restoration of incentives has drawn fresh investment into mining,where output has more than quadrupled since the mid-1980s, and brought arecovery in cocoa output. However, performance in Ghana’s main sector, agri-culture, remains very much at the mercy of the climate. Between 1992 and 1997agricultural growth has averaged around 3.4%. Services are led by retail andwholesale trade, with an annual growth rate ranging between 4.6% and 7.7%.

Gross domestic product(% real change)

Annual average1996 1992-96

GDP 5.2 4.3 Agriculture 4.0 3.6 Industry 4.2 4.1 Services 6.3 6.7

Regional comparisonsCôte d’Ivoire 6.8 4.8Nigeria 3.3 2.8Sources: Centre for Economic Policy Analysis, based on Ghana Statistical Service data; EIU.

Economic growth has traditionally been fuelled by public-sector investment,and, until recent years, the political and economic climate was inhospitable toprivate business. Since the early 1990s the government has eased regulations.However, its fiscal and monetary lapses have rendered many of the more pro-business measures irrelevant. The fiscal shock of 1992 prompted a 42% declinein private investment, and inflationary deficit financing has crowded outprivate-sector borrowers with high nominal interest rates of between 35% and48% in recent years (see Reference table 3 for further details about interest rates).

Since domestic savings also remain low, economic growth depends on foreigncapital inflows. The Development Assistance Committee calculates that dis-bursements from all donors totalled $653.6m in 1996, a marginal increase onyear-earlier levels. While Ghana has a substantial pipeline of undisbursed fundsto draw on, new aid commitments will decline in coming years. This is becausedonors plan to retreat from funding infrastructure and other projects that can befinanced by private investors and Ghana will have to make a more concertedeffort to attract foreign private investment in the future. (More detailed inform-ation on net official development assistance is shown in Reference table 19.)

14 Ghana: Economic performance


Inflation remains aproblem

In the 1990s the rate of inflation has fluctuated between 10.1% (in 1991) and74.3% (in 1995). Since 1996 the government has targeted inflation using payrestraint, high interest rates and exchange-rate policy. These policies havehelped lower the rate significantly but it remains high by international stand-ards, at an average of 27.8% in 1997.

Food output and money supply are the key determinants of inflation. Foodaccounts for 49% of the consumer price index and during harvest time (July-September) inflation tends to slow, while Ghana’s low level of monetisationmakes prices sensitive to monetary expansion. Money supply grew by 32.6%annually in 1996 and 40.1% 1997, overshooting the respective budget targetsof 5% and 15% (see Reference table 2 for further information on money supply;see Reference table 7 for data on consumer prices). The main causes of mone-tary expansion have been unplanned expansion of credit to the public sectorand miscalculations of the timing and size of the annual cocoa crop. In the pastunexpectedly large harvests have led to large inflows of foreign exchangewhich have pushed up money supply growth.

Inflation(% change)

Annual average1997 1993-97

Consumer prices 26.8 33.6

Regional comparisonsCôte d’Ivoire 4.9 10.2Nigeria 8.5 44.9Sources: Bank of Ghana, Quarterly Statistical Bulletin; EIU.

Regional trends

Before the 1980s governments tended to focus capital investment and projectson southern Ghana where Ghana’s elites have tended to have their homes andconstituencies. In addition, the bulk of Ghana’s most precious natural re-sources—gold, timber and cocoa—and its industry and commerce are in theWestern, Central, Ashanti and Accra regions. The railway, which runs fromAccra to Kumasi, then to Sekondi and the port of Takoradi, sums up the mostimportant trade orientations. Roads link other regions.

Although one of the poorest in terms of infrastructure and income per head,Western region is home to Takoradi port, Tarkwa, the former state gold mine,and the forests from which most of Ghana’s timber is drawn. Ashanti is therichest of the regions because it contains the bulk of gold resources—at theObuasi mine owned by the Ashtanti Goldfields Corporation—and a large shareof the country’s cocoa trees.

Northern Ghana—Upper West, Upper East and Northern regions—is the mainarea producing staple foods. These regions were heavily neglected until thePNDC came to power in 1983. The government has since invested heavily inthe area, partly out of a genuine desire to compensate for previous govern-ments’ neglect and partly because donors advocated pursuit of more evenregional development. Since then, the NDC has recognised that investment inthe area has paid off politically. Investments include extension of the national

Ghana: Regional trends 15


electricity grid, significant rehabilitation of north-south roads and greater ex-penditure on education. During the past three years the region has sufferedfrom violent ethnic clashes between the Konkombas and the Nanumbas,Gonjas and Dagombas. The heart of the problem lies in pressure on landresulting from the influx of many groups across the Togo-Ghana border intoYendi, Tamale and surrounding villages. The Konkombas, one of these migrantgroups, have been pressing for land ownership rights against the wishes of theNanumbas and other groups.

Resources

Population

Population, 1996 estimates

Total population (m) 17.5

Population growth rate (%; 1991-96) 3.1

Urban population (% of total) 31

Population aged 65 & above (% of total) 4.8Source: World Bank, World Development Indicators.

Population growth willslow

Ghana’s population has been growing at around 3% per year since the begin-ning of the 1990s, and stood at 17.51m in 1996, according to data from theWorld Bank. The latter also projects that growth will slow to 2.3% during thenext 15 years and that the population will reach 24m by 2010. As a result of anincreasingly younger population, Ghana’s labour force, which numbered 8min 1996, is projected to grow by 50% to reach 12m by 2001. (See Reference table8 for historical data on population and the labour force.) In 1996 nearly half ofthe population were under 16 while 4.8% were aged 65 and over.

In 1987 the Ghana Living Standards Survey reported that 80% of people classifiedas poor (those living on less than two-thirds of the national average income)lived in rural areas, as did almost all those in absolute poverty. The governmentestimates that the poorest areas are the mid-coast, the Volta Basin and thenorthern savannah. More recent World Bank data on poverty indicate that in1992, 31.4% of Ghanaians lived below the poverty line. In rural areas 34.2%live below the poverty line with a slightly lower figure of 27% in urban areas.This appears consistent with reports that while rural poverty seems to be de-creasing, urban deprivation has grown under structural adjustment policies.

Education

Until the 1970s Ghana had one of the most highly developed education systemsin West Africa. It declined after 1975, along with the rest of the economy. Inresponse, the National Democratic Congress (NDC) has undertaken an ongoingrestructuring of the sector’s organisation and finances—which will be a majorchallenge. The 1998 World Bank’s World Development Indicators reports that in1995, 47% of females and 24% of males aged over 15 years were illiterate.

16 Ghana: Population


Reforms have included changing the structure of the education system to sixyears of primary, three years of junior secondary, three years of senior secon-dary and four years of tertiary schooling. The curriculum has been reformed atboth primary and secondary levels and made more relevant. Most senior secon-dary schools offer vocational options in agriculture and technical subjects inaddition to general arts and sciences. Controversially, however, rationalisationof the system has included cuts in education service staff and the introductionof cost recovery. For example, Cape Coast University announced plans tocharge fees to students in late 1997, to cover faculty facilities, science equip-ment and exam costs.

In addition, some non-governmental organisations (NGOs) argue that theintroduction of fees has caused a decline in school enrolment. This appearsconsistent with data in the World Bank’s report, World Development Indicators,which suggest a decline in both primary and secondary enrolment ratios be-tween 1980 and 1995. In primary schools the ratio of children enrolled to thoseeligible fell from 79% to 75% over the period, and the ratio for secondaryenrolment fell from 41% to 37%. Fees sanctioned by the Ministry of Educationin 1993 were C250-500 (39-77 cents) per year. However, district authorities andparent teacher associations, which now have more responsibility for education,impose their own additional charges, which some parents cannot afford.

The government aims to reallocate more of the sector’s annual budgets towardsbasic education. Its so-called Free Compulsory Universal Basic Education(FCUBE) programme aims to cater for every child by 2005. However, thisambitious deadline could be rolled back. The strategic plan for the FCUBE wascompleted in 1995, but has taken longer than expected to implement. Moreprogress was made on the Primary School Development Project, under whichthe government claims to have opened around 100 primary schools and110 junior schools a year during 1995 and 1996.

Health

A mixed record As in other developing countries, Ghana’s health services are severely under-resourced. According to the World Bank’s World Development Indicators, generalaccess to healthcare was only 25% in 1993. The government estimates that only45% of the rural population has access to health services. Some aid officials,however, contend that the quality of health services has actually improved

Tertiary education

Ghana has several higher education institutions, the most important of which arethe University of Ghana, the University of Science and Technology, the Universityof Cape Coast and the University of the North. There are also 6 polytechnics,7 diploma-awarding colleges and 38 teacher training colleges. Total universityenrolments were projected to rise to 20,000 by 1997/98. The number of privateinstitutions offering computer and business studies has been rising since 1991—exact numbers are not known.

Ghana: Health 17


during the past decade, thanks to the expansion of primary healthcare and theintroduction of some cost recovery, which has put the system on a firmereconomic footing.

The report also shows that some services, particularly immunisations, are im-proving. Vaccinations against measles covered 54% of children in 1995, upfrom 16% in 1980. The percentage of children immunised against Diphtheria,Polio and Tetanus has multiplied over the same period from 7% to 51%.

The government plans further liberalisation in the health sector, having passedlegislation permitting private practitioners to fill gaps in state services. Thereforms, scheduled for implementation by 2003, should pave the way for moreprivate hospitals in the captial, Accra, and the integration of rural missionhospitals into the national network.

The rate of infant mortality stood at 71 per 1,000 live births in 1996. The maincauses of mortality are lack of protection from preventable diseases and con-taminated water. In addition, some 35% of children suffer from malnutrition,a predominantly rural phenomenon, which is especially acute in the savannahzone.

HIV and AIDS Ghana’s AIDS control centre estimated that 150,000-300,000 people were in-fected with the HIV virus at the beginning of 1996, and that some 30,000-40,000 had full-blown AIDS. The majority of sufferers are women, and some2-4% of all pregnant women were HIV carriers in 1995, according to researchcited by the centre. However, the incidence of infection is beginning tochange: in the mid-1980s the ratio of female to male cases was 5:1, whereas by1995 the ratio had fallen to 1.5:1.

Natural resources and the environment

Ghana has a wide range of natural resources including arable land, forests andsizeable mineral deposits of diamonds and gold, manganese and bauxite. Sev-eral lakes offer considerable potential for additional hydroelectric power, mostof which is currently serviced from the vast Lake Volta. Offshore hydrocarbondeposits in the Tano Basin have proven crude oil reserves of 14.3m barrels, andfree natural gas reserves estimated at 193bn cu ft. Ghana’s location on the westcoast of Africa also permits extensive fishing from the Atlantic.

The climate is tropical, with variations between the northern savannah and thesouthern coastal areas. The hottest months are March and April, when thetemperature often reaches 31°C. The wettest month is June, when averagerainfall is estimated at 178 mm, after which the main food harvest comes. Thehigh forest in the south-west extends over 82,000 sq km and covers 34% of thecountry; it is Ghana’s main source of wood and timber exports. Gold is concen-trated in the Ashanti and Western regions, although there are also sizeabledeposits in Central and Brong-Ahafo regions. Lake Volta, which supplies theAkosombo Dam, lies to the south-east in Volta region but spreads north andnorth-west into Northern region (see map). Much of the country’s food isproduced in the north, while cocoa, the main cash crop, grows in parts of allthe main regions below Northern region.

18 Ghana: Natural resources and the environment


Economic infrastructure

Transport and communications

The government has directed a significant part of the aid and capital budget tomuch-needed improvements in the country’s infrastructure during the pastdecade, and is now looking more to the private sector to fund new projects.During the 1970s the transport system and ports disintegrated severely, imped-ing exports, imports and internal trade. The telephone system barely func-tioned. Since the early 1980s there have been major repairs to roads, ports andhighways, and the national electricity grid has been extended to northernGhana. However, much more investment is needed and more projects are ex-pected in 1998-99. (Historical transport statistics are given in Reference table 9.)

Roads are beingimproved—

According to government statistics, road transport is the principal domesticcarrier, accounting for around 98% of freight moved. The network totals38,700 km, of which 14,700 km are trunk roads and 24,000 km gravel or earthfeeder roads. Roads have been upgraded in small sections each year since themid-1980s. In 1996 alone the Department of Feeder Roads rehabilitated1,080 km of feeder roads and regravelled 120 km.

—as are the railways The railway system consists of a triangular network connecting Accra, Kumasiand Takoradi, and has benefited from rehabilitation. However, there is littleup-to-date information on how this has improved passenger and freightthroughput. The railways have traditionally transported manganese, bauxite,some cocoa, and timber. Further rehabilitation is planned for the Eastern andCentral lines, including new engines and rolling-stock. Passenger journeys fellconsistently in 1987-93, from 3.4m to 1.4m.

The ports are handlingmore traffic

In contrast, throughput has been rising fairly steadily at Ghana’s two ports,Tema to the east and Takoradi to the west, following rehabilitation works sincethe late 1980s. This has helped to reduce the turnaround time for ships, whichis now estimated to be the quickest in West Africa. While Tema appears tohandle the bulk of imports, Takoradi handles most of the exports. The amountof cargo unloaded at Tema has risen consistently, from 2m tonnes in 1985 to4.2m tonnes in 1996. Loadings at Takoradi more than doubled between 1985and 1995, from 581,000 tonnes to 1.2m tonnes, but declined to 1.04m tonnesin 1996. The bulk of loadings at Takoradi comprised timber, manganese andbauxite. In the same period (1985-96) Takoradi’s incoming loads rose from317,000 tonnes to 755,000 tonnes. Inland water transport on Lake Volta is lessefficient, mainly because of inadequate port and navigation facilities.

Airline connections aregood

Ghana is well served by international airlines, including the national carrier,Ghana Airways, which is slated for privatisation. From Ghana’s Kotoka inter-national airport there are direct flights to Europe, the United States, SouthernAfrica and most countries in the West African subregion.

Ghana: Transport and communications 19


Telecommunications areinadequate

It is hoped that Ghana’s ramshackle telecommunications sector will be trans-formed by new investment and competition. In late 1996 the government sold30% of Ghana Telecom to a Malaysian-led consortium, G-Com, under termsthat require the new investors to install 225,000 new lines by 2002. It alsolicensed a competitor, the Ashtanti Goldfields Corporation (ACG) consortium,which is bound to install a further 50,000 lines and invest more than $40mduring the next decade. While some businesses and banks have already re-ported significant improvements since privatisation, many domestic consum-ers still complain that the service, including waiting times for lines to beinstalled, remains inadequate. Capacity in 1995 was 98,000 lines. The WorldBank’s World Development Indicators estimates that in 1996 there were 4 work-ing telephone lines per 1,000 people. It also estimates that the average waitingtime for a new main line telephone line is over two and half years. Cellphonenetworks have been operational in Ghana for several years although exactsubscription numbers are not available.

Energy provision

The weather dictates thepower supply—

Water is the main source of domestically generated energy, with Lake Voltaand its dam supplying the main hydroelectric power station at Akosombo, andanother smaller lake feeding the Kpong plant 40 km downstream. Reliance onwater makes power supplies extremely vulnerable to the weather. In late 1997the Volta dam’s water level fell to 74 metres—the third-lowest level ever re-corded, and plunged the country into a full-scale electricity crisis in 1998,which forced many industries to reduce output and has limited Ghana’s ex-ports of electricity to Togo and Benin.

—and the electricity crisishastens the search for

alternative projects

The crisis, and growing demand from Ghana’s expanding mining industry, havehastened government and private-sector initiatives to develop alternative powersources, and several projects are now on the drawing board. Ghana’s only oil-and gas-fired power plant, a recently constructed 220-mw station at Aboadse, isscheduled to add 110 mw by the end of 1998. Its owner, the Volta River Author-ity (VRA), the state generator, has also signed an agreement with a US investorto double the plant’s planned capacity to 660 mw in the future. In addition, atthe end of 1998 a US-based company, KMR Power, plans to start building a220-mw gas-fired combined cycle plant. The facility will service the miningindustry in western Ghana using gas from Côte d’Ivoire or Nigeria. The crisis hasalso enhanced the attractions of two projects of Ghana National PetroleumCorporation (GNPC) to construct barge-mounted power plants using gas fromthe Tano basin. GNPC’s projects should create capacity of 255 mw.

Since 1982 the government and donors have significantly expanded the dis-tribution network, extending the national electricity grid all the way to thenorth. However, a lack of funds—the utilities had long charged submarketrates—has limited recent investment. The government began to put the systemon a more commercial footing in 1997, when it announced plans to raise tariffsin phases during 1998 and 1999.

20 Ghana: Energy provision


Energy balance, 1997(m tonnes oil equivalent)

Oil Gas Coal Electricity Other Total

Production 0.00 0.00 0.00 1.60a 5.87 7.47

Imports 1.35 0.00 0.00 0.09a 0.00 1.44

Exports –0.20 0.00 0.00 –0.12a 0.00 –0.32

Primary supply 1.15 0.00 0.00 1.57a 5.87 8.59

Net transformationb –0.15 0.00 0.00 –1.12 0.00 –1.27

Final consumption 1.00 0.00 0.00 0.45c 5.87 7.32

a Expressed as input equivalents, on an assumed generating efficiency of 33%. b Transformation input and output, plus energy industry fuel andlosses. c Output basis.

Source: Energy Data Associates.

Financial services

Reforms have put thebanking system on a

sounder footing

Financial services have improved in recent years, with the introduction of anew stockmarket, the Ghana Stock Exchange, and several new financial insti-tutions. The improvements began with the financial sector adjustment pro-gramme of 1989, under which the banking sector was forced to clean up itsbalance sheets, and the government took over bad loans. A new law prescribedminimum capital requirements and capital adequacy ratios, and improved theregulatory and supervisory framework. In December 1997 the sector’s assetstotalled C3.8trn ($1.9m). Four institutions, Ghana Commercial Bank (GCB—the country’s largest), Standard Chartered Bank, Social Security Bank (SSB) andBarclays accounted for around 58% of the assets.

Competition hasincreased—

Since 1992 privatisation and the arrival of four new commercial banks havebrought increased dynamism to the sector. The four new commercial banks areTrust Bank, Prudential Bank, International Commercial Bank and Metropolitanand Allied Bank. Merchant Banking has also expanded in recent years, withfour players now competing for business: Merchant Bank Ghana, EcobankGhana and CAL Merchant Bank are well established while First AtlanticMerchant Bank, the most recent arrival, opened for business in 1996.

The government has sold off equity in several wholly or part state-owned banks.After some difficulty finding an active investor for SSB, a consortium of fundmanagers, led by a UK-based company, Blakeney Asset Management, built up acontrolling 51% stake in 1997 and hired a technical partner, Allied Irish Bank,to enhance SSB’s management and services. GCB’s privatisation had a promis-ing start in February 1996, when the initial public offering (IPO) was heavilyoversubscribed. Some ten months later, a Malaysian investor, Denko IndustrialCorporation, paid a deposit to secure a core stake in GCB. However, the acquis-ition process has since stalled. By mid-1998 Denko had still to deliver all thefunds and an appropriate technical partner to reform GCB. The governmentplans to put at least two more institutions under the hammer in 1998-99,National Investment Bank and Agricultural Development Bank, both foundedas development banks but which now operate on more commercial bank lines.Local bankers believe that the deadlines are ambitious, and do not expect to seethem divested until 2000.

Ghana: Financial services 21


—but banks remainrisk-averse—

Competition has brought some benefits. Commercial banks have introducedmany new products, including ATMs and credit-card services, and have im-proved the turnaround time for cheque clearing and cashing. However, thebanks have a limited appetite for lending to small and medium-sized localbusinesses, which has caused some local resentment. This situation has beenexacerbated by government issues of low-risk high-yielding debt, which hasaccommodated complacency and risk-averse lending policies. The governmentis expected to reduce its domestic borrowing in 1998-99, suggesting that banksmay have to build up stronger relations with local clients.

—as margins widen Regardless of the new competition in the retail banking sector, margins betweenlending and deposit rates have widened, from around 11-15% in the early 1990sto 20% in mid-1998. In contrast, tough competition has driven merchant banks’margins down to around 4%. Slow economic growth, and commercial bankencroachment on some wholesale business, has created a situation where moreplayers are competing to service a relatively static group of blue-chip custom-ers—state enterprises, listed companies and foreign investors.

The non-bank financialsector is relatively

undeveloped

The non-bank financial sector is growing and diversifying, although it remainsrelatively small. In the area of securities and capital markets, Ghana has twodiscount houses: Consolidated Discount House (CDH), established in 1987;and the Securities Discount Company (SDC), which followed in 1991. Sincethe GSE’s opening, several stockbrokers, and at least one unit trust have set upshop. Databank Ghana operates as an investment bank, providing financialadvisory and stockbroking services.

There are now 17 insurance companies compared with fewer than 10 in 1993,although the industry remains dominated by two state firms. The governmentis preparing one of them, State Insurance Corporation, for privatisation. Ghanaalso has mortgage companies, including the Home Finance Company, buildingsocieties, at least one venture capital company and three leasing companies.

A fledgling stockmarket The Ghana Stock Exchange (GSE) began operating in 1990 to trade in corporateequities, bonds and government securities. The securities industries law, whichgoverns the GSE, called for the establishment of a Securities and ExchangeCommission (SEC) to oversee and regulate the bourse. As a temporary measure,these responsibilities were placed in the office of the governor of the Bank ofGhana (the central bank) but nine years later no one has been appointed,leaving the Bank governor as the de facto sole regulator.

The GSE now has 21 listed companies, and measured by market capitalisation isthe third-largest stock exchange in Africa, after South Africa and Namibia. How-ever, its capitalisation figure is misleading owing to the dominance by AshantiGoldfields Corporation (AGC), which accounts for more than 80% of marketcapitalisation. To iron out potential distortions in measuring the GSE Index, theexchange excludes more than 19m AGC shares listed abroad, and includes onlythe 3.3m AGC shares tradeable in Ghana, giving the company a weighting of 10%.

The GSE was very small until 1994, when the government divested around30% of its equity in AGC, and sizeable stakes in six other companies in thesame year. The well-publicised AGC divestment stimulated foreign and local

22 Ghana: Financial services


interest in other Ghanaian equities. (For more details on Ghana’s stockmarket,see Reference table 10.) Despite more (albeit smaller) privatisations in 1995 and1996, poor economic fundamentals undermined the GSE’s attractions. Dyna-mism returned in 1997, when falling inflation and the government’s post-election efforts to restore fiscal stability tempted some investors back to theGSE. Enthusiasm was maintained during the first quarter of 1998, and thedomestic share index rose by over 100% to reach 981 points. However, profittaking and fears that the electricity crisis would damage company performancehalted this rise in the second quarter.

Production

Manufacturing

Index of manufacturing production(1977=100)

% weighting 1995a 1996a

Food products 15.00 99.6 102.5

Beverages 8.11 109.0 116.2

Tobacco & tobacco products 7.75 52.0 53.1

Textiles, wearing apparel & leather goods 13.71 54.8 56.1

Sawmill & wood products 7.22 100.2 105.3

Petroleum products 19.00 101.4 103.5

Iron & steel products 3.25 581.6 584.5

Electrical equipment & appliances 1.34 42.9 53.5

Transport equipment & other products 3.03 – –

Overall index 100.00 109.9 115.0

a Provisional.

Source: Ghana Statistical Service, Quarterly Digest of Statistics.

The government facesdifficult decisions

The Economic Recovery Programme (ERP) has brought mixed results to themanufacturing sector. Falling subsidies and exposure to competition haveforced businesses to rationalise and improve performance, but many have alsobeen forced to close down. High interest rates, bank charges and lack of financehave slowed expansion.

Manufacturing growth was sluggish in 1994 and 1995, recording less than 2%growth per year. Since then it has picked up to more than 3% per year, led bya recovery in beverage production.

The government, nevertheless, faces some difficult decisions, in particular onways it can assist viable or nascent industries at a time of strong global compet-ition. Choices are limited by donor conditionalities, which prohibit subsidiesand protectionism. Although it rejects blanket protectionism out of hand, thegovernment has displayed a readiness to support selected nascent industries. In1994 it set up a C10bn ($10.4m) business assistance fund, financed by privatis-ation earnings, to aid distressed but potentially viable enterprises and hasreduced domestic sales tax on selected items.

Ghana: Manufacturing 23


Ghana has a broad anddiverse industrial base

For a Sub-Saharan country of its size, Ghana has a broad and diverse industrialbase, covering aluminium smelting, sawmills, timber and agricultural process-ing plants, brewing, cement manufacture, oil refining, textiles, electricals, phar-maceuticals, mining and many others. The impetus for this came in the yearsfollowing independence from the government led by Kwame Nkrumah’s Con-vention People’s Party (CPP), which sought to create a self-sufficient Ghana witha diversified industrial base. However, much of the planning and many of theindustries were ill-conceived. In subsequent years inappropriate policies starvedmany viable industries of foreign exchange for spare parts, while keeping unvi-able plants afloat with subsidies and protective policies. By 1982 utilisation ofindustrial capacity had declined to 21% in medium and large factories.

The positive impact of reforms began showing through after the mid-1980s.Capacity utilisation rates recovered from 35% in 1987 to 40% the following yearand 44.5% in 1992 (the latest year for which data are available). Sectors showingthe most improvement were textiles, garments, metals, plastics and non-ferrousmetal manufactures. (Reference table 11 gives historical manufacturing prod-uction statistics.) At the same time, however, Ghana’s industry lobby estimatesthat at least 120 factories were closed between 1988 and 1992, the garments,leather, electrical, electronics and pharmaceuticals sectors being worst hit.

Mining and semi-processing

Gold dominates the mining sector, which has thrived as a result of a series ofastute revisions to Ghana’s mining laws in the late 1980s. Gold is one ofGhana’s two most important sources of foreign exchange, and any change ininternational prices has a direct bearing on the country’s external accounts.The diamond, manganese and bauxite sectors are recovering after considerablecontraction during the economy’s decline in the 1970s. (Reference table 12provides further information about minerals production.)

Gold reforms havequadrupled output

Ghana’s gold reserves lie in Ashanti, which has vast underground resources,and in Western and Central regions, where much alluvial mining takes place.Ashanti Goldfields Corporation (AGC) has long been the country’s largestproducer; a series of expansion programmes more than tripled output from300,000 oz in 1985 to 1.1m oz in the year ending December 1997, includingoutput from AGC’s new foreign acquisitions. AGC was once owned by thegovernment (with a 55% stake) and the UK conglomerate Lonrho (45%) butthe ownership structure changed in April 1994 when a portion of its shares wasfloated on the London and Accra stock exchanges, leaving the governmentwith around 29%. Another sale, in February 1996, reduced its stake to 22%.AGC used to account for 90% of Ghanaian production, but its dominance hasbeen eroded by other mines, which accounted for about 37% of Ghana’s esti-mated production of about 1.64m oz in 1997.

Other major producers include the Teberebie Mine, Ghanaian AustralianGoldfields and Billiton Bogosu. The Tarkwa Mine is expected to become amajor producer in the future following modernisation by Goldfields Ghana,which should eventually increase production to 270,000 oz/year.

24 Ghana: Mining and semi-processing


Gold output, 1997(fine oz)

AGC 1,039,967

Teberebie 238,804

Ghanaian Australian Goldfields n/a

Billiton Bogosu 108,388

Small-scale miners 64,729

Goldfields Ghana 53,771

Barnex (Prestea) 33,483

Bonte 34,839

Total incl others 1,643,378Source: Ghana Minerals Commission.

Diamonds—a history ofcorruption and smuggling

Ghana’s diamond reserves lie mainly in the Birim basin. The sector has had anunfortunate history characterised not only by corruption and smuggling butalso by poor management at the former state-owned Ghana ConsolidatedDiamonds (GCD). GCD figures suggest that output in 1978 was 1.4m carats,declining steadily to less than 140,000 carats a year by the end of the decade. Areorganisation at GCD, which was taken over by private companies in the early1990s, has not returned output to the earlier highs. Rather, output has fluctu-ated significantly in recent years, from around 294,000 carats in 1995 to some240,000 carats in 1997. Small-scale miners are thought to produce a sizeableamount each year, and local press reports have estimated their output ataround 100,000 carats a year. However, extensive illegal mining and a thrivingparallel market at Akwatia’s Diamond Junction makes it difficult to measuresmall-scale output with accuracy.

Ghana is a big exporter ofmanganese

Ghana is one of the world’s largest exporters of manganese. Ghana’s Chamberof Mines estimates that output totalled 455,624 tonnes in 1996, falling back to436,903 tonnes in 1997.

Bauxite has potential Ghana also has bauxite reserves, but only a small proportion is currentlymined, at Bui. Ghana Bauxite Company is the main producer of bauxite, re-porting sales of 518,325 tonnes in 1997. This was a significant improvement onyear-earlier sales of 383,370 tonnes. The US Volta Aluminium Company(VALCO) does not process Ghanaian bauxite into alumina, but uses importedraw materials instead.

Agriculture and forestry

Agriculture is critical to Ghana’s economy, accounting for 40-45% of GDP andemploying most of the workforce. However, despite its importance and somefundamental reforms of the sector, growth has been sluggish and unpredictable.Output grew by 4.8% in 1991, contracted by 0.6% the following year, and aver-aged 2.8% per year during 1991-95. Growth registered more than 4% in 1995 and1996, but it is uncertain whether farmers can sustain the improvement.

To improve the sector’s performance, the government has removed food pricecontrols, raised cocoa prices and boosted extension services. But the resultshave been disappointing. While farmers are planting more crops, and have

Ghana: Agriculture and forestry 25


improved cereal yields, overall productivity has declined. The World Bank’sWorld Development Indicators estimates that agricultural value added per workerfell by around 15% between 1979-81 and 1994-96, to $684.

The low productivity seems to be because of low investment and poor tech-nology, while the removal of subsidies on fertilisers and other agriculturalinputs has also had an effect. The World Bank’s report records that Ghana’sfertiliser consumption per ha and cropland under irrigation have halved since1979. More recent initiatives include increased involvement of the privatesector. All crops remain susceptible to changes in weather conditions.

Food crops Maize, cocoyam, cassava and other root vegetables are the main food crops, ac-counting for 55% of agricultural production. Plantings appear to have risen con-siderably since 1990, when the government ended minimum prices. Cerealplantings (including rice, millet and guinea corn) have risen from 902,000 ha in1979-81 to around 1.2m ha during 1994-96, and yields rose by 73% over the sameperiod, according to World Development Indicators. The area under starchy staplecultivation has also increased. No records are available for pulses and vegetables.(Reference table 13 gives historical data on the production of selected food crops.)

Cocoa Most cocoa is produced by some 1.6m peasant farmers on plots of less than3 ha in the forest areas of the Ashanti, Brong-Ahafo, Central, Eastern, Westernand Volta regions. In the early 1960s Ghana was the world’s largest producer ofcocoa, with an average annual output of 450,000 tonnes, but output fell to anall-time low of 159,000 tonnes in 1983/84. It has since recovered significantly.The 1995/96 crop was the best since the 1960s, at 404,000 tonnes, and after adip the following year, the 1997/98 season was expected to deliver anotherbumper crop of some 395,000 tonnes. Between 1991 and 1996 productionaveraged around 300,000 tonnes.

Higher producer prices, which the government has been steadily increasingsince the mid-1980s, were one recovery incentive; another was the provision,by donors, of seedlings to replace trees lost to age and bad weather. The areaunder cultivation is around 850,000 ha, which the government would like toincrease by 100,000 ha by 2000. It would also like to see yields, which arecurrently 450 kg/ha for the highest-yielding variety, double to the 800-1,000kg/ha attained in Malaysia. This would require far more fertiliser and insecti-cides, which farmers can barely afford since subsidies were removed as part ofthe agricultural sector reforms.

In 1992 the government liberalised internal marketing, allowing licensed pri-vate traders to buy cocoa domestically at prices competitive to those offered bythe state-owned Ghana Cocoa Marketing Board (Cocobod). Private buyers nowaccount for 30% of local purchases. However, this has led to quality-controlproblems in post-harvest production. The government argues that the reformprocess should be slowed down until such problems have been solved. TheWorld Bank, however, is keen to press ahead with liberalisation of externalmarketing.

Forestry More than one-third of the total land area of Ghana is covered by forest, not allof it suitable for commercial exploitation. Commercial forestry, concentrated

26 Ghana: Agriculture and forestry


in Western Region in southern Ghana, was the third-largest foreign-exchangeearner in 1995, with revenue of $190m. Since 1983 the industry has undergonesubstantial changes, supported by aid and commercial credits, which havefocused on forestry management, research and equipment for logging, saw-milling and manufacture. The old Ghana Timber Marketing Board has beendisbanded and replaced by two bodies: the Timber Export Development Board,which is responsible for marketing and pricing; and the Forest Products’Inspection Bureau, which monitors contracts and maintains quality standards.

The programme has been successful in raising foreign-exchange earnings buthas contributed to the depletion of forest reserves as Ghana’s need to exporthas increased. Deforestation is estimated to have amounted to 2% of forestcover a year during the 1980s. The government has had to make difficultchoices between preservation and the need for hard currency: it banned ex-ports of 18 species of log in 1989 and has since extended the list, but plans tophase out log and lumber exports altogether have been shelved. The currentstrategy is a package of incentives and penalties to encourage exporters toincrease value added. Although there are signs that this has happened recently,lack of funds, managerial skills, technical expertise and marketing facilitiesremain significant constraints.

The external sector

Merchandise trade

Foreign trade, 1997a

($ m)

Exports 1,481.3 of which: gold 563.7 cocoa beans 464.0 timber 164.6

Imports –1,752.9 Non-oil –1,521.6 Oil –231.3

Trade balance –271.6

a Provisional.

Source: Ghana budget, 1998.

Ghana’s trade profile is that of a poor developing country. It has a wide tradedeficit and is dependent on a few primary products—gold, cocoa and timber.This dependence is reflected in swings in export earnings according to output ofthe key commodities and international price fluctuations.

Export volumes arerecovering—

Since 1991 the annual rate of growth in dollar export earnings has averaged7.1%, but it has fluctuated within a range of -5.7% and 16.3%. Even so, growthin timber and gold earnings in recent years has made Ghana less susceptible tomarket or weather conditions in cocoa. In 1997 cocoa accounted for only 31%

Ghana: Merchandise trade 27


of export earnings compared with 53% in 1983. Gold’s share has, meanwhile,risen from around 15% in the mid-1980s to around 40% in 1996. However,falling international prices reduced its share to 38% in 1997, suggesting thatcocoa earnings may be higher in 1998. (Reference table 14 gives exports ofcocoa, gold and timber in 1992-96.)

Non-traditional exports have also contributed to the diversification effort,growing from $1.9m in 1984 to an estimated $188m in 1997. The main growthsectors include agriculture and agro-processing industries, (particularly fishproducts and pineapples), processed timber and aluminium products. Whilethe weakening currency favoured non-traditional exports during the first halfof this decade, high interest rates and lack of capital have posed constraints. In1996 and early 1997 the government’s use of the national currency, the cedi,as a nominal anchor against inflation has to some extent undermined growthin non-traditional exports.

—but earnings remainvulnerable to price swings

Despite some attempts at price hedging, cocoa and gold both remain vulner-able to commodity price fluctuations. In the mid-1980s cocoa prices reachedover $1/lb but bottomed at 45 cents/lb in the second quarter of 1993. Theyhave since recovered, to average 73.4 cents/lb during 1997. Gold prices havesimilarly experienced a long period of decline over the past two decades, withparticularly sharp falls in recent years, and gold is currently trading at justunder $300/oz in 1998 from over $490/oz in 1987.

Both mining and cocoa industries have tried to induce price stability: miningcompanies by means of swaps and options while Cocobod by trading on thefutures exchange. So far, AGC, a sophisticated hedger, has been able to iron outfluctuations in gold prices. Cocobod has been less successful, in part becausethere are fewer hedging opportunities for “soft” commodities.

Import levels aredetermined by

exchange-rate policy

Exchange-rate policy plays a key role in determining import values, as dointernational price trends for manufactured items. For example, expectationsthat the government would defend the cedi for much of early 1993 led to arapid build-up in stocks and imports that year and helped cause imports toexceed projections by around $200m. Oil accounts for around 10% of totalimports and thus changes in international oil prices tend to have a limitedimpact on the import bill.

The bulk of Ghana’s trade is with OECD countries (see Reference table 15 forhistorical data on Ghana’s main trading partners). The main non-OECD trad-ing partners are Nigeria, from which Ghana imports most of its oil, and Togo.The UK has been Ghana’s main supplier for many years, often providing morethan 20% of Ghana’s imports, together with Nigeria and the United States.Ghana’s main export markets are the UK, neighbouring Togo, the US andGermany, which takes much of Ghana’s timber. The most notable change overthe past decade has been the growth in trade with France, which has striven toextend its influence beyond francophone countries. Imports from France havealmost doubled since 1989, while exports to France have more than quadru-pled; the rise in imports from France corresponds with increases in French aid.

28 Ghana: Merchandise trade


Main trading partners, 1997a

(% of total)

Exports to: % of total Imports from: % of total

UK 15.7 UK 16.2

Togo 10.8 Nigeria 13.4

US 9.6 US 10.2

Germany 9.0 Germany 5.4

a Derived from partners’ trade data and subject to a wide margin of error.

Source: IMF, Direction of Trade Statistics Yearbook.

Invisibles and the current account

Current account, 1997a

($ m)

Merchandise exports fob 1,481.3

Merchandise imports fob –1,752.9

Trade balance –271.6

Services balance –442.8

Net transfers 500.6

Current-account balance –213.8

a Provisional.

Source: Ghana Budget, 1998.

The balance on services and income has traditionally been in deficit. The mainoutgoings are debt service and insurance and freight services, reflecting thedecline of Ghana’s once-illustrious Black Star shipping company. (Balance-of-payments data are given in Reference tables 16 and 17.)

Tourism draws muchinvestment

Like many developing countries, Ghana produces few exportable services, al-though recent efforts to revive the tourism sector have paid off to some extent.Ghana’s hotel sector declined dramatically during the 1970s and 1980s but hasbeen rehabilitiated by large-scale private investment. Meanwhile, tourist attrac-tions such as old slave forts and wildlife parks have also seen substantial invest-ment. Tourism officials report some 286,000 arrivals in 1995 but data areunreliable, as the figures cited combine business visitors, Ghanaians residentabroad returning to Ghana and foreign tourists.

Net private transfers haveincreased

An increase in private transfers in recent years has made a positive contributionto the invisibles account. After hovering at around $200m at the turn of thedecade, they have increased in recent years to around $290m in 1997. Thesefunds are mainly remittances from Ghanaians working abroad and anecdotalevidence suggest that they are often used to finance small businesses at home.

Official transfers mainly comprise aid grants, which ranged from $306m to$346m between 1992 and 1996. Total net transfers have together totalledaround $450m-520m net for most of the past five years.

Ghana: Invisibles and the current account 29


Capital flows and foreign debt

Aid flows were generousduring the late 1980s

When the Provisional National Defence Council (PNDC) seized power in 1981it was clear that large amounts of foreign aid would be required to achieve anysignificant improvement in the economy, as private lending had dried up.

During the early 1980s Ghana was one of the first Sub-Saharan countries tosustain implementation of a structural adjustment programme. Donors sawGhana as a test case, and wanted to prove that their policy prescriptionsworked. Anxious for a success story to set an example for the rest of Africa, theyput more aid per head into Ghana than into most other African countries.Since Ghana’s political transition to democracy in 1992, relations with donorshave been mixed. Donors have shown a readiness to suspend disbursementswhen the government has relaxed fiscal policy or fallen behind schedule onprescribed reforms. In addition, as donors seek to encourage more private-sec-tor involvement in economic development, Ghana will find it more and moredifficult to obtain continued inflows although it does still have a large pipelineof undisbursed commitments to use up in the meantime. (See Referencetable 19 for data on official development assistance.) Relations with the IMFhave also varied. In the 1980s the IMF regarded Ghana as a model client anddisbursed more than $775m in adjustment funds. Ghana “graduated” fromIMF adjustment borrowing with great fanfare in 1991, but signed up for an-other deal in 1995. Both sides opted for suspension of the programme in 1996,when it was clear that the government would overspend in the run-up to the1996 elections. The programme was reactivated in April 1998.

The government has agood record on debt

service

Since the present government came to power, Ghana’s external debt has quadru-pled, from $1.39bn in 1980 to $6.2bn in 1996, according to the World Bank’sGlobal Development Finance (see Reference table 18 for further data on externaldebt). However, the Bank of Ghana (the central bank) reported the debt at $5.35bnfor 1996, and at $5.7bn for mid-1997. The differences appear to be a result ofdifferent interpretations of short-term debt which the World Bank records ashaving more than doubled from $320m in 1990 to $705m in 1996. However, theBank of Ghana contends that it was a more manageable $286m in 1996.

Nevertheless the debt burden, relative to exports, appears to be easing. WorldBank data show that the debt to earnings ratio has fallen from a peak of 400%in 1992, to around 349% in 1996. The debt-service ratio, which peaked at 50%of earnings in 1989, has come down to 26.4%. Ghana’s debt service is relativelylight because around 63% of obligations have been contracted on concessionalterms, with nearly 50% of total debt owed to multilateral creditors.

The National Democratic Congress (NDC) administration improved percep-tions of Ghana’s country risk in the early 1990s, having cleared some debtarrears. This enabled the government to return to the international capitalmarkets in 1991 for loans to prefinance the annual cocoa crop and GNPC’s oilrequirements. However, other borrowings (including those of the GNPC) willbe kept to a minimum in the near future. In 1996 the IMF and World Bankimposed a moratorium on government non-concessional borrowing and loanguarantees, after the government began borrowing abroad in order to fundvote-winning projects.

30 Ghana: Capital flows and foreign debt


Direct and portfolioinvestment

After more than a decade of low and static flows, direct inward investmentbegan to pick up in 1993. That year’s inflow, at $125m, was more than fivetimes the annual level in previous years. The following year it almost doubledto $233m and then halved in 1995 again and remained low at $120m in 1996.The fluctuations reflect the erratic levels of investment, particularly in miningsector projects and inflows linked to privatisation.

The data on portfolio flows are conflicting. The IMF’s International FinancialStatistics does not show any portfolio investment since the stock exchangeopened in 1990. The World Bank’s Global Development Finance also shows noportfolio investment before 1993 but then records a massive $557m in 1994,which was the year that the government divested shares in Ashanti GoldfieldsCorporation. In contrast to the past few years, where current-account deficitswere more than financed by net capital inflows, the overall balance of pay-ments in 1996 recorded a deficit of $20.4m. This deficit was financed by draw-ing on reserves and by a 13.4% increase in short-term loans and overdraftfacilities. The 1998 budget indicates that the overall balance of payments re-turned to a small surplus of $24.9m in 1997.

Foreign reserves and the exchange rate

Having been kept artificially high for many years, the exchange rate was deval-ued and floated in stages after 1984. In 1987 the government introduced anauction system, and then in 1990 allowed foreign-exchange bureaux to set up.Since then foreign currency has been easy to acquire for relatively small trans-actions, but the imbalance between supply and demand has caused the cedi todepreciate significantly since 1992 (see Reference table 21 for details of histori-cal exchange-rate data). In 1995 the government began to use the exchangerate as a nominal anchor against inflation. This strategy involved considerableintervention in the foreign-exchange market but slowed the nominal deprecia-tion to 36.6% in 1995 and 21.3% in 1996 (Bank of Ghana figures). This,combined with still high rates of inflation, translated into a sharp appreciationof the real exchange rate. In 1997 the rate of cedi depreciation was faster thaninflation, suggesting that the government had abandoned the anchor policy.The cedi lost 23% against the dollar, ending the year at C2,272:$1.

Import cover has fallen The interventions in the foreign-exchange market used up much of Ghana’shard currency, and left the government thinly stretched when donor inflowsslowed in 1997. Foreign-exchange reserves shrank from an estimated $802m in1996, to only $454m in November 1997. (See Reference table 20 for historicaldata on foreign reserves.)

Exchange rate and foreign reserves, 1997

Exchange rateC:$ (end-period) 2,272C:$ (period average) 2,050

Foreign-exchange reserves ($ m) 454

Total reserves excl gold ($ m) 480Source: IMF, International Financial Statistics.

Ghana: Foreign reserves and the exchange rate 31


Appendices

Regional organisations

Economic Community ofWest African States

(Ecowas)

Ecowas was established in 1975 by the following West African countries: Benin,Burkina Faso, Côte d’Ivoire, The Gambia, Ghana, Guinea-Bissau, Liberia, Mali,Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. Cape Verde joinedin 1977. The principal objective of the community, to be achieved in stages, isthe establishment of a customs union and a common market to promote thefree movement of goods and people within West Africa. The initial treatyprovided for the harmonisation of regional policies in several areas, includingagriculture, industry, energy, transport and communications. Ecowas has asmall executive secretariat based in the Nigerian capital, Abuja, and six special-ised commissions. Decision-making powers are divided between a Council ofMinisters, while supreme authority rests with the annual conference of headsof state and government, who elect a chairman.

Progress towards improved regional economic co-operation and integrationhas been limited, however, with Ecowas in the 1990s focusing increasingly onpolitical and security issues. Although a number of tariffs have been abolishedor reduced under the aegis of Ecowas, in 1994 Benin, Burkina Faso, Côted’Ivoire, Mali, Niger, Senegal and Togo, which already have a common cur-rency, the CFA franc, and similar legal codes, set up their own Unionéconomique et monétaire ouest-africaine (UEMOA) to work towards a customsunion and other aspects of economic convergence. Guinea-Bissau joined theUEMOA in 1997.

This move reflected the fundamental tension between the largest and mostpowerful country in the region, Nigeria, and much of francophone West Africa.Since assuming the presidency of Ecowas in 1995, Nigeria has succeeded inpersuading member states to pay long overdue subscriptions, while theNigerian finance minister, Anthony Ani, spoke in 1997 of moving towards apartial convertibility of the naira with the CFA franc, as an essential prereq-uisite for closer regional co-operation. However, in the absence of any formalproposals or a timetable for change, the split between Nigeria, with its anglo-phone allies Ghana, Sierra Leone and Liberia, and their francophone neigh-bours is likely to remain a major obstacle in the process of economicintegration.

The civil wars in Liberia and Sierra Leone since 1989 provided further evidenceof both the conflicting alliances within West Africa and the efforts the regionhas been prepared to make to overcome such tensions. In the case of Liberia,Côte d’Ivoire and Burkina Faso strongly supported the leader of the rebelinsurrection, Charles Taylor, whereas Nigeria remained emphatically hostile tohis cause. In 1990, under strong pressure from Nigeria’s then military govern-ment, regional heads of state abandoned a commitment to non-interference inmember states’ internal affairs and agreed to set up an Ecowas CeasefireMonitoring Group (Ecomog). Ecomog was, however, dominated by contin-gents from Nigeria and quickly became an active player in the conflict. Achange of government in Nigeria in 1993 led to a re-evaluation of policy

32 Ghana: Regional organisations


towards Liberia, and the new head of state, (the now late) General Sani Abacha,dropped his opposition to Mr Taylor and began to work more closely withother countries in the region to bring peace to Liberia.

In 1993 the Ecowas treaty was revised to extend economic and political co-operation between member states, setting as targets the establishment of a singlecurrency and a common market, a regional parliament, an economic and socialcouncil and a court of justice. The new treaty formally gave Ecowas responsi-bility for the prevention and resolution of regional conflicts. The economicobjectives remain distinctly ambitious and are highly unlikely to be realised inthe short or medium term. At the same time critics have accused Nigeria of usingthe community’s new political character to mask its own aim of dominating theregion’s security environment. Such criticism was strongly voiced followingEcomog’s botched military response to the coup in Sierra Leone in May 1997;the decision to deploy the mainly Nigerian force had been taken by Abacha,apparently without formal Ecowas approval. Six months later Nigeria claimedits actions had been vindicated when all parties to the situation in Sierra Leoneagreed to accept an Ecowas plan to restore civilian government.

Communauté économiqueet monétaire de l’Afrique

centrale (CEMAC)

CEMAC was officially launched in Libreville, Gabon, on February 7th 1998.This follows the harmonisation of external customs tariffs and the abolition onJanuary 1st of customs duties payable at borders between the six memberstates—Gabon, Cameroon, Equatorial Guinea, Chad, Central African Republicand Congo (Brazzaville). So far, the economic impact of the change has beenless than expected, largely owing to poor transport and communications links.The immediate goals of CEMAC are to:

• form an investment promotion strategy and implement a CEMAC-wideinvestment code;

• replace turnover tax with value-added tax (VAT), but Gabon is the onlycountry to have done so to date;

• forge a common strategy for promotion of agriculture in the region;

• create a “solidarity fund”, including funding from Western donors, to pro-mote regional integration, particularly in the fields of transport and communi-cations;

• harmonise mining and other legislation between the countries; and

• open a regional stock exchange.

The previously dormant Communauté économique des états de l’Afriquecentrale (CEEAC) was relaunched at CEMAC’s inauguration to co-ordinatetransport and communications links within the region. The body comprisesthe six members of CEMAC plus four non-Franc Zone countries: DemocraticRepublic of Congo (DRC, formerly Zaire), Burundi, Rwanda and São Tomé andPríncipe. Angola has also been invited to join.

Tripartite Commission forEast African Co-operation

(EAC)

Established in May 1996, the Tripartite Commission for East African Co-operation (EAC) is the successor to the now defunct East African Community.Its three members are Kenya, Tanzania and Uganda. Unlike the old East African

Ghana: Regional organisations 33


Community, which attempted to impose supranational control over all areasof government, the new EAC focuses on the harmonisation of policies. Specifi-cally, when the EAC was formed, the dismantling of borders for the free move-ment of people, a common travel document and a joint secretariat for railwayswere envisaged. Other measures to be tackled included the harmonisation offiscal and monetary policies, and policies on traffic, the environment andsecurity. When progress has been made in some of these areas, the EAC willbegin to look at developing a regional economic infrastructure and promotingtrade and investment. Significantly, the EAC was not designed to create acommon currency and monetary union in the first instance, but to provide astrong alternative to other regional trading organisations such as the SouthernAfrican Development Community (SADC) and the Franc Zone.

At their first anniversary meeting in Arusha, Tanzania, in May 1997, the threemember states moved closer to establishing an economic and political federa-tion when they adopted a common passport and flag and laid the groundworkfor co-operation through a formal treaty. The three presidents issued a commu-niqué in which they highlighted the East African Co-operation DevelopmentStrategy for 1997-2000. The document sets out a comprehensive action pro-gramme, the aim of which is to foster sustainable and equitable developmentin the three countries.

Issues yet to be resolved include how the benefits from common investmentand services will be shared, and ways of increasing intra-regional trade (whichis currently less than $1bn and heavily skewed towards Kenyan exports). Sincethe co-operation agreement was signed, Kenya, Uganda and Tanzania havetried to harmonise their fiscal and monetary policies; one measure includes adouble taxation arrangement. The agreement also provides for joint measuresto prevent tax evasion. Other achievements include the convertibility of thecurrencies of the three states, pre- and post-budget consultations between thefinance ministers, synchronisation of the budget day in the three countries,regular consultations between the central banks, and co-operation in capitaland securities regulation. In an attempt to promote trade and investment, theEast African Business Council has been established, drawing members fromnational private-sector organisations in the region. Lawyers have also formedtheir own forum, the East African Law Society.

In infrastructure, the three countries are undertaking joint projects, includinga digital transmission system estimated at $69m. The project, which is due tostart in mid-1998, is financed by the telecommunications authorities of thethree countries, together with the European Investment Bank (EIB) and theEast African Development Bank. A regional road network has also beenplanned, which would be developed jointly, with the assistance of inter-national financiers.

In April 1998 a new treaty is expected to set out the steps to political federation,based on the report from a meeting held in November 1997. The treaty estab-lishing the EAC has shortcomings which can only be corrected by a new treaty.It will confer on the EAC recognition as a legal entity acting in the commoninterest of member states. Discussions on broadening the membership base,perhaps to include Rwanda, Burundi and, although less likely, the Democratic



Republic of Congo (DRC, formerly Zaire), will also continue, as will discussionsamong leaders about the relationship of the EAC with the existing but mori-bund Common Market for Eastern and Southern Africa (Comesa) and thethriving SADC.

Common Market forEastern and Southern

Africa (Comesa)

The Common Market for Eastern and Southern Africa (Comesa), which is basedin Lusaka, Zambia, is the successor organisation to the regional PreferentialTrading Area (PTA), and came into force on December 8th 1994 after 12 mem-ber states ratified the integration treaty. Comesa is a rival to the SouthernAfrican Development Community (SADC) and includes Angola, Burundi,Comoros, Democratic Republic of Congo (DRC, formerly Zaire), Djibouti,Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda,Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. SouthAfrica’s decision not to join the organisation, which aims to liberalise tradebetween the member countries, has given the SADC more leverage. In 1997Mozambique and Lesotho gave notice that they wanted to leave Comesa toconcentrate on their membership of the SADC. Angola’s trade with the Comesacountries is extremely limited.

The PTA, which was launched in 1981, aimed to liberalise trade and encourageco-operation in industry, agriculture, transport and communications, thus lay-ing the foundation for Comesa to push for a regional common market by 2000.The common market is expected to bring about complete freedom of move-ment of goods, services and capital, and eventually monetary union. At ameeting in Lusaka in April 1997, the Comesa heads of state agreed that acommon external tariff structure would be introduced to deal with all third-party trade. The main obstacles to successful integration remain the unclearnature of the relationship with the SADC, most of whose members also belongto Comesa, and the diversity of the member states’ economies.

In general, commitment to the organisation and its financing is rather frail.The administration budget of approximately $4m is heavily dependent onKenya and Zimbabwe. At the April 1997 meeting members urged each other toconcentrate on financing activities, which has resulted in the postponement ofsectoral meetings and other activities. The civil strife in Somalia, Sudan, DRC,Rwanda and Burundi has also impeded attempts at regional integration.

The progressive liberalisation of intra-PTA trade began in July 1984, and amultilateral clearing facility, established in Harare, Zimbabwe, began oper-ations in February 1984. A PTA monetary unit of account (UAPTA), then equi-valent to the SDR, was used to settle debts between members every twomonths, the balances being payable in dollars. The 1997 heads of state meetingendorsed a proposal to replace the UAPTA with a Comesa dollar, initially tiedto the US dollar.

By 1991 the clearing house was handling 70% of all intra-PTA trade. Accordingto the PTA secretary-general, intra-PTA trade grew at an annual average of over8% after 1985, reaching a total volume of $1.7bn in 1992. However, intra-Comesa trade still accounts for only about 6% of members’ global trade. Thereasons for this small share include the distortions arising from widespreadcrossborder smuggling, a lack of political commitment and weak balance-of-



payments and foreign reserves positions. While there are hardly any officialtrade links between many of the member states, a few countries (Kenya,Madagascar, Tanzania, Uganda, Zambia and Zimbabwe) account for 60% oftotal intra-Comesa trade. In 1996 Kenya alone exported some $900m of goodsto other Comesa countries, most of which went to Uganda and Tanzania.

Another constraint has been the strict “rules of origin”, which stipulate thatpreferential treatment can be granted only to goods produced by companiesthat are managed by, and 51% of whose equity is held by, nationals of amember state. Kenya and Zimbabwe originally argued strongly against thisrule—after years of a sliding-scale arrangement it is once again under review,particular attention being given to value-added provisions. The agreed sched-ule for removing customs barriers has been frequently revised. The most recentdecision—to reduce import duties by 80% for member countries by October1996—is a case in point. However, only five members have complied fully, andmost have consistently failed to meet the timetable for tariff reductions.

A PTA Trade and Development Bank was established in 1986, but only becameoperational in 1989. Now renamed the East and Southern African Trade andDevelopment Bank, its headquarters have been temporarily relocated fromBujumbura (Burundi) to Nairobi (Kenya). As well as the African DevelopmentBank, 15 Comesa members hold shares in the bank; in December 1995 its totalsubscribed capital amounted to $82.9m.

Inter-governmentalAuthority on

Development (IGAD)

The Inter-governmental Authority on Drought and Development (IGADD), thebrainchild of the president of Djibouti, Hassan Gouled Aptidon, was estab-lished in January 1986 with six East African members: Djibouti, Ethiopia,Kenya, Somalia, Sudan and Uganda. Its stated aim was to co-ordinate andchannel funding into the alleviation of drought and desertification and intoagricultural development. Progress on development and environmental pro-jects was slow but the organisation did make headway as a forum for regionalpolitics, facilitating the successful reconciliation of Somalia and Ethiopia in1988. Regional events in 1991, however, undermined IGADD: the presidents ofEthiopia and Somalia were overthrown, Eritrea gained independence and theself-proclaimed Somaliland Republic emerged.

Although IGADD was strengthened when Eritrea became the seventh memberin September 1993, it achieved little success in helping to resolve internalconflicts in Sudan and Somalia. Thus in March 1996, at a summit in Nairobi,IGADD renamed itself the Inter-governmental Authority on Development(IGAD) and adopted a new charter proclaiming conflict resolution to be itspriority. IGAD gained official recognition from the Organisation of AfricanUnity (OAU) as a regional economic organisation in June 1997, and it began topay more attention to economic integration. However, the resolution of con-flicts, both regional and domestic, continues to be seen as a precondition foreconomic integration, but IGAD’s failure to play a part in resolving the conflictbetween its own members, Eritrea and Ethiopia, has undermined its regionalinfluence. Nevertheless, developments since 1996 are expected to help IGAD tosecure donor aid for long-term development projects.



The Multilateral MonetaryAgreement

The Multilateral Monetary Agreement (MMA) is the most recent in a series ofagreements for formalising the use of the same or parallel currencies among itsSouthern African members: Lesotho, Namibia, South Africa and Swaziland. Theoriginal Rand Monetary Area (RMA) agreement of 1974 also includedBotswana, but it opted out two years later to pursue an independent monetarypolicy and exchange rate. The agreement was renegotiated in 1986 to form theCommon Monetary Area (CMA), and then again in 1992 to become the MMA,when Namibia became independent and chose to continue its monetary rel-ationship with South Africa.

Lesotho, Namibia and Swaziland introduced their own national currenciesafter independence, but their exchange rates remain fixed at parity with therand. There are no exchange controls between the members. This ensures thatthe external exchange rate and interest rates are essentially exogenous to thesmaller members, being determined in a unified market, the core of which is inSouth Africa. The rand is legal tender in Namibia and Lesotho, for which SouthAfrica pays compensation. Under the 1992 agreement the rand ceased to belegal tender in Swaziland, opening the possibility of delinking the Swazililangeni from the rand. However, in early 1998 all member countries main-tained the parity of their currencies with the rand, and foreign-exchange regul-ations and monetary policy throughout the CMA continued to reflect theinfluence of the South African Reserve Bank (the central bank).

The Franc Zone Although the Franc Zone evolved in the colonial era, its current form wasshaped by treaties signed by its principal members in the early 1970s. The zonegoverns the credit, foreign-exchange and monetary relations between Franceand 13 former French colonies in Africa and Equatorial Guinea, as well asbetween France and its overseas departments and territories, and Monaco.

In November 1972 Cameroon, the Central African Republic, Chad, Congo andGabon signed an agreement redefining their monetary co-operation. Relationsin this field with France were restated in a treaty which was also signed inNovember. Equatorial Guinea became the sixth African signatory to these ac-cords in 1984. The principal elements of this co-operation are a regional centralbank based in Yaoundé (Cameroon), the Banque des états de l’Afrique centrale(BEAC), and a common currency, the CFA (Coopération financière en Afriquecentrale) franc. The BEAC is governed by a monetary committee composed ofthe six Central African states and a joint monetary committee consisting of thesix members plus France. A regional customs grouping formed in 1966, theUnion douanière des états de l’Afrique centrale (UDEAC), also groups the sixstates.

A similar chain of events unfolded in francophone West Africa. In November1973 Côte d’Ivoire, Dahomey (now Benin), Niger, Senegal, Togo and UpperVolta (now Burkina Faso) signed a treaty redefining their monetary co-operation in the Union monétaire ouest-africaine (UMOA), founded in 1962. Aconvention with France followed in December 1973, and Mali became a partyto both agreements in 1984. As with the Central African members of the FrancZone, the UMOA was based on a common issuing central bank, the Banquecentrale des états de l’Afrique de l’ouest (BCEAO, based in Dakar), and a com-mon currency, the CFA (in this case, Communauté financière africaine) franc.



The UMOA became the Union économique et monétaire ouest-africaine(UEMOA) in January 1994. Its council of ministers formulates credit and mone-tary policies and controls the BCEAO. The council also has responsibility forthe regional development bank, the Lomé-based Banque ouest-africaine dedéveloppement (BOAD). A seventh country, Guinea-Bissau, joined the UEMOAon March 5th 1997 and became a member of the Franc Zone one month later,on April 17th 1997.

A comparable arrangement exists for Comoros and a convention has beensigned with France. The issuing and central bank is the Banque centrale desComores and the currency is the Comorian franc (Cfr).

The principal features of the Franc Zone are freedom to transfer funds through-out the zone, convertibility of the different currencies and fixed exchangerates. The Banque de France (the French central bank) guarantees the moneyissued by the regional central banks, which in turn are required to maintain aminimum of 65% of their reserves in French francs with the French Treasury.The much-praised unlimited convertibility of the CFA franc was restricted inAugust 1993, largely because of massive capital flight, but was restored shortlyafter a devaluation.

Each regional bank holds an operations account (compte d’opérations), a currentaccount denominated in French francs, with the Treasury in Paris. This is theprincipal payments mechanism in the zone. Its stability is founded on tightmonetary and credit discipline underpinned by two specific safeguard meas-ures: central banks are required to maintain a 20% foreign-exchange cover oftheir sight liabilities, and governments are not allowed to draw from theirregional bank’s central funds more than 20% of the previous year’s budgetreceipts (although some enterprising governments have found ways to circum-vent this requirement).

In the mid-1980s it was argued that the CFA franc was greatly overvalued,encouraging imports for the urban elite, restraining exports and deterring in-ward investment. Falling world prices for the zone’s principal exports (oil,coffee, cocoa and cotton) contributed to a sharp fall in the zone’s terms oftrade, estimated at 45% in 1985-93 by the French government. Income perhead in the zone shrank by about 20% in the same period. These factors, alongwith French government reservations about funding the budget and current-account deficits of zone members, finally brought major changes. January 1994saw the first devaluation after 46 years, to CFAfr100:FFr1 (and Cfr75:FFr1). Thispromptly led to new IMF money for zone members.

The future of the CFA franc and of the zone has been highlighted by the movetowards European economic and monetary union. France has pledged to main-tain its support for the zone, and it suggests, without confirmation from its EUpartners, that the convertibility and parity of the CFA franc will be transferredto a single European currency in due course.

Comité permanentinter-états de lutte contrela sécheresse dans le Sahel

(CILSS)

The CILSS was set up in 1973 by eight Sahelian countries of West Africa—Burkina Faso, Cape Verde, Chad, Guinea-Bissau, Mali, Mauritania, Niger andSenegal—to co-ordinate the region’s response to the drought emergency at thetime. The Gambia joined almost immediately afterwards, bringing the



organisation’s membership to the present nine. There are two CILSS researchand training institutes, in Niger and Mali, and the organisation produces statis-tics on member countries’ food production in association with the Food andAgriculture Organisation of the UN. After several years of financial and organis-ational difficulties, the CILSS was reorganised in 1993-95 and now comprises sixmajor programmes. Peripheral activities have been abandoned and the organis-ation has become more independent of its member states. The total CILSSbudget for 1995 was CFAfr11.7bn ($23m).

The Lomé Convention The Lomé Convention affords a group of 71 African, Caribbean and Pacific(ACP) countries preferential trade and aid links with the EU. At a meeting inLibreville, Gabon, in October 1997 the leaders of the ACP countries prepared acommon position for negotiations, beginning in 1998, for a successor agree-ment to the convention, which expires in 2000. The convention is increasinglyat odds with globalisation, and in a test case in 1997 the World TradeOrganisation (WTO) ruled that aspects of the EU-ACP arrangements over ba-nana imports were unfair. The ACP leaders meeting in Libreville resolved toconcentrate on boosting intra-ACP co-operation, partly through organisationssuch as the Southern African Development Community (SADC).

The fourth and current convention (Lomé IV) was signed in 1989, replacing theprevious agreements signed in Lomé in 1975, 1979 and 1984. Lomé IV main-tained the long-term development aims of previous conventions, but placednew emphasis on economic policy reform in member states in line with thegeneral emphasis on “conditionality” among multilateral funding bodies. Theterms of Lomé IV hold for ten years, compared with five years previously. Anew Financial Protocol was agreed by the EU in 1995 following protracteddiscussions. The UK and Germany sought to cut contributions and switch tobilateral aid, but France proposed an increase in total funding which was lessthan the stated requirements of the ACP countries. In the eventual deal, totalfunding of Ecu14.6bn ($19bn) over five years was agreed, representing a 22%increase on the previous five years.

To achieve the Lomé objectives, a series of instruments was clearly defined inthe convention. The most important was the European Development Fund(EDF), with an allocation of Ecu13.3bn under the Financial Protocol. The EDFis the main source of multilateral EU aid to the ACP states, and most of thefunding is provided as grants. The remaining Ecu1.3bn was allocated to theEuropean Investment Bank (EIB), which lends on a commercial basis. In add-ition, the ACP states gained a 16% cut in import tariffs on mainly agriculturalproducts that did not previously enjoy preferential treatment.

The convention offers two other schemes that are separate from the FinancialProtocol. The Stabilisation of Export Earnings Scheme (Stabex) was set up tocover losses of earnings caused by a fall in prices or a decline in production ofthe main ACP agricultural exports. A total of 49 products are on the Stabex list.Funding allocated to Stabex was increased by 62% to Ecu1.5bn under Lomé IV.Sysmin, a special financing facility for countries reliant on the export of min-erals, was increased by 16% to Ecu480m. The schemes, however, suffer from ashortage of funds.



Negotiations between the EU and the ACP countries on renewing the conven-tion are expected to start before the end of 1998. Most ACP countries are infavour of maintaining the status quo, but the EU is seeking to reform theconvention, which has failed to bring about the intended growth in trade. TheEU is expected to lay greater emphasis on regional integration in ACP coun-tries, and by seeking separate sub-agreements within the Lomé Convention totake into account not only regional but also economic differences. The EU isalso expected to phase out preferential trade arrangements, which have comeunder increasing attack from the WTO.

Southern AfricanDevelopment Community

(SADC)

In August 1992 Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia,Swaziland, Tanzania, Zambia and Zimbabwe signed a treaty establishing theSouthern African Development Community (SADC). SADC replaced theSouthern African Development Co-ordination Conference (SADCC), whichwas formed in 1980 by the Southern African states in a largely unsuccessfulattempt to reduce the region’s economic dependence on white-ruled SouthAfrica; Namibia joined SADCC shortly after independence in 1990. Mauritiusbecame the 12th member in August 1995, and in 1997 Democratic Republic ofCongo (DRC, formerly Zaire) and Seychelles became members.

SADC inherited SADCC’s secretariat, based in Gaborone, Botswana, and theresponsibilities of each member for co-ordinating a different policy sector haveremained broadly unchanged. Post-apartheid South Africa formally joined theorganisation on August 29th 1994 following its first multiracial elections. Theend of apartheid in South Africa has inevitably shifted some of SADC’s politicaland economic emphasis, although its goals remain broadly the same as thoseof SADCC: boosting Southern Africa’s general economic independence, build-ing regional integration and trade, and mobilising support for national andregional projects. In mid-1994 (shortly before South Africa joined SADC) only4% of members’ trade was within the community, while 25% was with SouthAfrica. This pattern has not changed a great deal since then, despite SouthAfrica’s membership.

In August 1996 the presidents of the SADC countries (with the exception ofAngola) signed a protocol to create a regional free-trade area by progressivelyreducing and ultimately removing all import tariffs between member statesover a period of eight to ten years. Implementation of the plan has beencomplicated by pre-existing subregional trade groupings, such as the SouthernAfrican Customs Union (SACU), and the reluctance of individual countries toopen vulnerable sectors to competition. However, important progress wasmade in 1997 when all members agreed to ratify a trade protocol which pro-vides for the phased reduction and ultimate elimination of tariffs on goodsoriginating in member states. South Africa, which has by far the largest eco-nomy in the region, has agreed to reduce its tariffs over an eight-year period;the other members have been given a ten-year period.

A total of 90% of SADC’s funding for sectoral projects is from foreign sources.International support for the community should continue to be solid, al-though donors warned in early 1995 that members should not expect to relyon continual handouts. At present SADC members contribute equally to theannual budget of $12.5m.



SADC members aim to increase their access to European markets and securestable commodity prices under the Lomé Convention, or its replacement. Atthe same time the EU and South Africa are in negotiation over establishing afree-trade area between them. Many other SADC countries, particularly mem-bers of SACU, feel threatened by such an arrangement and fear that they couldbe flooded by cheap European imports if the plan goes ahead. Negotiationsbetween the EU and South Africa have run into difficulties over the timetablefor phasing out tariffs, but an agreement is expected by the end of 1998.

SADC is consolidating its co-operation on non-trade issues, and intra-SADCagreements in areas such as mining, establishing a landmine-free zone anddrug-trafficking are proceeding.

Southern African CustomsUnion (SACU)

SACU is a customs union linking Botswana, Lesotho, Namibia, Swaziland (the“BLNS” states) and South Africa (Namibia was treated as a member beforeindependence by virtue of its relationship with South Africa). SACU is theoldest and most formal regional economic grouping in Southern Africa, datingback to 1910. The customs union, administered by South Africa, gathers exciseduties on local production and customs duties on member states’ imports fromoutside the SACU area. Imports are subject to very high tariffs—more than100% in some cases—which protect industries within the union, particularly inSouth Africa. The BLNS states depend on South Africa for most of their importsand, more crucially, on the privileged access to the South African market whichtheir goods enjoy.

A revenue-sharing formula continues to govern the allocation of collectedduties to each member country. The governments of Lesotho and Swaziland, inparticular, depend heavily on their shares of redistributed SACU receipts fortheir budgetary revenue. Negotiations to phase out the SACU agreement infavour of a wider free-trade arrangement to incorporate the Southern AfricanDevelopment Community (SADC) have stalled because of the fears of someBLNS countries that they will lose crucial revenue, as well as privileged accessto the South African market, and because they fear that a bilateral agreementbetween the EU and South Africa could flood the market with cheaper importsand affect the competitiveness of their own goods. Production patterns in thesefour countries have been determined in part by access to the South Africanmarket and the widening of a free-trade agreement to include all SADC coun-tries could harm their productive sectors. Both SADC and the EU have assuredthe BLNS countries that sensitive products will be ringfenced under specialprotocols, and that local sensitivities will be taken into consideration whentariffs are phased out.

Organisation of AfricanUnity (OAU)

The OAU was founded in 1963 by 30 African nations to promote solidarity andhigher living standards, to defend the sovereignty of member states and toeliminate colonialism. Another 21 signatories have since joined, the last ofwhich was South Africa in 1994. Morocco left in 1985. The OAU is committedto creating an Africa-wide customs union and to removing tariff and non-tariffbarriers by 2004. The organisation has been criticised as being just a talkingshop, and has been hampered for years by severe budgetary problems.



The foreign affairs ministers of member states meet twice a year to discuss theimplementation of the organisation’s accords. The issues raised are dealt withat the annual assembly of heads of state, which meets in June or July. Theannual conference is hosted by the member state that is due to take over thechairmanship of the organisation for the next year. The 1997 conference tookplace in Harare, where the Zimbabwean president, Robert Mugabe, took overfrom Paul Biya of Cameroon, although Mr Biya did not attend the conference.There have, in addition, been three extraordinary conferences of heads of state:the first was in 1970 to discuss the Angolan crisis; the second, in 1980, soughtto address the continent’s economic problems; and the third, in 1990, at-tempted to address the problem of African debt.

The OAU is committed to the creation of an African Economic Community(AEC) according to the Lagos Plan of Action drawn up in 1980. This wasoriginally scheduled to be in place by 2000, but at the 27th summit of heads ofstate in Abuja, Nigeria, in June 1991 this target was postponed to 2025. TheAEC treaty, signed at the summit, outlined six stages, including the removal oftariff and non-tariff barriers to trade and the establishment of a continent-widecustoms union by 2004. A commitment was also made to the establishment ofan African Common Market (ACM), with a central bank and single currency,by 2031.

The problem of conflict resolution has come to dominate the annual summitof heads of state. At the 1992 summit the OAU was criticised for never havingsuccessfully resolved a conflict in any of its member states. The possibility ofthe establishment of a military force to observe and monitor ceasefires negoti-ated by the OAU has been raised by several heads of state but no formalcommitment has been made. The issue has been particularly pressing in thewake of renewed ethnic violence in Burundi in 1996, but the OAU againstopped short of agreeing to establish a military force, although it did sponsorpeace talks between Burundian factions in Addis Ababa, Ethiopia.

Any move to step up the activity of the OAU is hampered by the organisation’ssevere budgetary problems. In November 1995 the ten worst debtors, owing$16.5m between them, were debarred from speaking or voting at any OAUmeeting. The return of full rights is conditional upon their paying a large partof their arrears. By the time of the 1997 summit, although the organisation’sfinances were in better shape than they had ever been, membership arrears stilltotalled $53m. The OAU’s budget for fiscal year 1997/98 was set at $64m.

The OAU remains a high-profile talking shop. Little real action results from itspolicy decisions, constrained as it is by limited funds and the varying levels ofcommitment of its members.

Sources of information

National statistical sources In the 1980s Ghana’s statistical data were plentiful by regional standards. How-ever, Ghana has recently fallen behind other African countries where therehave been aid-financed improvements in data gathering and formulation. Themost obvious example is the government’s tardiness in submitting data to theIMF’s International Financial Statistics.

42 Ghana: Sources of information


Shortage of expertise and trained personnel and lack of money mean thatmany of the statistics are out of date. The Quarterly Digest of Statistics (publishedby the Ghana Statistical Service), the main source for all important nationaldata, is patchy. While some of the data in the 100-plus tables in the June 1994edition, still the latest comprehensive source available even in mid-1998, coverto the end of 1993, some of the trade statistics cover only to 1989. However,there have been some improvements, particularly in the agricultural outputsections, which are now more up-to-date.

The Bank of Ghana’s Quarterly Economic Bulletin is the main source of inform-ation about money supply and bank and exchange rates. The Central StatisticalOffice also provides reasonably up-to-date information about inflation. TheGhana Stock Exchange reviews its operations in its annual Fact Book.

The Accra-based independent think-tank, CEPA, provides a comprehensiveanalysis of recent macroeconomic trends in its annual Macroeconomic Reviewand Outlook; data are drawn from local sources and from CEPA’s own estimates.

Further data are contained in the Budget speeches issued by the Ministry ofFinance, Accra.

International statisticalsources

Apart from these key sources, most of the rest of the data are derived from theWorld Bank and the IMF, which in turn rely on the government to furnish thedata. This applies to both to International Financial Statistics and the WorldBank’s Global Development Finance (formerly World Debt Tables). There are gen-erally few inconsistencies between data in these sources and the QuarterlyEconomic Bulletin.

Otherwise, use is made of the World Bank’s own data for information aboutsubjects it has researched extensively while preparing for project lending. Thebest information on the financial sector, including “informal savings”, exists inthe December 1994 Financial Sector Review, Bringing Savers and Investors Together.The Bank’s Country Economic Memorandum, published in collaboration with thegovernment of Ghana in May 1995, provides a broader view of the macro-economic issues, under the title Ghana: Growth, Private Sector and PovertyReduction. More useful data are included in the World Bank’s Technical Paper,Supply and Demand for Finance for Small Enterprises in Ghana. For more generalinformation on social and economic development, see the World Bank’s SocialIndicators of Development and Trends in Developing Economies.

For information on international aid, see the OECD’s Geographical Direction ofFinancial Flows to Aid Recipients.

Select bibliography J Herbst, The Politics of Reform in Ghana, 1982-91, California University Press,1993

D Rimmer, Staying poor: Ghana’s political economy, 1950-90, Oxford, 1993

P Nugent, Big men, small boys and politics in Ghana, 1994

Ghana: Sources of information 43


Reference tables

Reference table 1

Government finances(C m)

1993 1994 1995 1996 1997

Total revenuea 664.4 1,261.0 1,784.8 2,219.0 2,616.0 Tax 516.1 826.4 1,138.7 1,710.5 2,069.0 Non-tax 112.4 395.4 552.3 287.5 376.7.0 Grants 35.9 39.2 93.8 78.0 66.6

Total expenditure –760.9 –1,150.0 –1,714.5 –2,555.0 2,914.0 Current 615.7 975.7 1,271.4 1,861.0 2,290.0 Capital 145.2 174.3 443.1 682.0 539.0

Overall balance –96.5 112.0 70.3 –335.0 –297.0

Financing 96.5 –112.0 –70.3 335.0 297.0 of which: external 56.4 –85.0 –42.6 –195.0 –430.0

a Including divestitures.

Sources: Ghana Statistical Service, Quarterly Digest of Statistics; Ghana Budget 1998.

Reference table 2

Money supply(C bn unless otherwise indicated; year-end)

1993 1994 1995 1996 1997

Money (M1) 461.35 693.55 925.29 1,215.72 1,724.06

Quasi-money 203.32 275.16 434.38 586.89 815.87

Money (M2) 664.67 968.71 1,359.67 1,802.61 2,539.93

M2 growth (%) 26.3 45.7 40.4 32.6 40.1Source: IMF, International Financial Statistics.

Reference table 3

Interest rates(%; year-end)

1993 1994 1995 1996 1997

Central Bank rate 35.0 33.0 45.0 45.0 45.0

Treasury bills 30.95 27.2 35.4 41.6 42.8

Commercial bank deposits 23.63 23.15 28.73 34.54 35.76

Commercial bank lendingAgriculture 24.0-39.0 22.5-35.0 28.0-47.0 30.0-47.0 n/aExport trade 23.0-39.0 20.3-35.5 34.3-47.0 30.0-47.0 n/aManufacturing 26.0-39.0 26.0-35.5 33.0-47.0 39.0-47.0 n/aSources: Bank of Ghana, Quarterly Economic Bulletin; IMF, International Financial Statistics.

44 Ghana: Reference tables


Reference table 4

Gross domestic product(% change year on year in brackets)

1992 1993 1994 1995 1996

GDP at current prices (C bn) 2,803 3,675 4,950 7,418 10,633(15.5) (31.1) (34.7) (49.9) (43.3)

GDP at constant (1975) prices (C m) 7,495 7,848 8,168 8,535 8,970 (3.9) (5.0) (3.8) (4.5) (5.2)

GDP per head at current prices (C ’000) 176 233 292 424 590 (6.0) (32.3) (25.3) (45.2) (39.1)

GDP per head at constant (1975) prices (C) 470 478 482 488 498(1.0) (1.9) (0.7) (1.4) (2.1)

Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Staff Country Report 1998.

Reference table 5

Gross domestic product by expenditure(C m; at constant 1975 prices; % change year on year in brackets)

1992 1993 1994 1995 1996

Private consumption 5,995 6,244 6,332 6,443 6,714(5.0) (4.1) (1.4) (17.5) (4.2)

Central government consumption 1,242 1,432 1,470 1,482 1,496(11.8) (11.7) (–15.1) (15.1) (0.9)

Gross fixed investment 1,089 1,318 1,402 1,434 1,453(8.9) (21.0) (6.4) (2.3) (2.3)

Change in stocks 3 3 3 3 3

Gross domestic expenditurea 8,328 8,976 9,207 9,362 9,666

Exports of goods & services 1,347 1,390 1,463 1,610 1,782 (6.4) (3.2) (5.2) (10.0) (10.7)

Imports of goods & services 2,179 2,498 2,501 2,437 2,473 (14.0) (14.6) (0.0) (–2.5) (1.5)

GDP at market prices 7,495 7,867 8,168 8,535 8,976

Factor income paid abroad –139 –129 –135 –149 –155

GNP 7,356 7,738 8,034 8,386 8,821

a Totals do not add in source.

Sources: Ghana Statistical Service; IMF, Staff Country Report 1998.

Ghana: Reference tables 45


Reference table 6

Gross domestic product by sector(C m; at constant 1975 prices; % change year on year in brackets)

1992 1993 1994 1995 1996

Agriculture 3,195 3,269 3,358 3,500 3,691 (-1.2) (2.3) (2.7) (4.2) (5.5)

Industry 1,096 1,155 1,187 1,227 1,275(6.2) (5.4) (2.8) (3.3) (3.9)

Mining & quarrying 107 116 122 129 134 Manufacturing 657 684 694 706 725 Electricity & water 110 119 125 133 141 Construction 222 236 246 259 275

Services 3,392 3,634 3,817 4,004 4,209(8.2) (7.2) (5.0) (4.9) (5.1)

of which: wholesale & retail trade, restaurants & hotels 1,157 1,252 1,320 1,406 1,523 finance, insurance, real estate & business services 706 748 778 801 835

GDP at factor costa 7,495 7,868 8,168 8,535 8,976

a Totals do not add in source.

Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Staff Country Report 1998.

Reference table 7

Price indices(% change year on year in brackets)

1993 1994 1995 1996 1997

Consumer prices (1990=100) 162.3 202.7 353.4 473.7 605.8(24.9) (24.9) (74.3) (34.0) (27.8)

Food price indexa (1990=100) 150.2 188.9 302.6 365.5 n/a(24.9) (25.8) (60.2) (20.8) (n/a)

a Food prices have a weighting of 492 out of 1,000 in the consumer price index.

Sources: IMF, International Financial Statistics; Ghana Statistical Service, Statistical Newsletter; IMF, Staff Country Report 1998.

Reference table 8

Population and labour force

1993 1994 1995 1996

Population (m; mid-year) 16.20 16.64 17.08 17.5

Population growth (%) 2.8 2.7 2.6 2.6

Labour force (m) 7.33 7.53 7.74 8.00Sources: World Bank, Social Development Indicators; World Development Indicators.



Reference table 9

Transport statistics

1992 1993 1994 1995 1996

RailwaysPassenger traffic (m km) 135.1 117.7 n/a n/a n/aGoods traffic (m km) 108.6 137.1 n/a n/a n/a

RoadsNew registrations of motor vehicles 15,262 n/a n/a n/a n/a

Ports (’000 tonnes)Tema 3,910 4,130 4,090 4,611 4,890 Loaded 791 601 629 681 690 Unloaded 3,119 3,529 3,461 3,930 4,200Takoradi 1,802 2,123 2,315 1,857 1,795 Unloaded 702 722 811 657 755 Loaded 1,100 1,401 1,504 1,200 1,040Sources: Ghana Statistical Service, Quarterly Digest of Statistics; Ghana Ports and Harbours Authority.

Reference table 10

Stockmarket indicators(end-period unless otherwise indicated)

1993 1994 1995 1996 1997

No. of listed companies 15 17 19 21 21

Market capitalisation C bn 96.5 1,968.4 2,399.0 2,597.2 2,552.8 $ m 118.4 1,872.9 1,648.8 1,492.5 1,137.8

Volume of trading (m shares) 37.94 93.04 55.84 35.75 166.93

Value of trading (period total) C m 3,177.9 73,088.2 27,590.6 27,785.0 95,839.0 $ m 4.8 75.1 22.3 17.0 46.7

Local indexa 170.8 371.7 298.1 360.8 511.7 % change 115.9 117.6 –19.8 21.0 41.8

a GSE all-share index.

Sources: IFC, Annual Emerging Stockmarket Fact Book; Ghana Stock Exchange, Fact Book 1996; CDH Group, Monthly Review.



Reference table 11

Manufacturing production(volume indices unless otherwise indicated; 1977=100)

% weighting 1992 1993 1994 1995 1996

Food manufacturing 15.0 62.8 90.3 90.8 99.6 102.5

Beverages 8.1 112.2 105.5 109.4 109.0 116.2

Tobacco & tobacco products 7.8 47.1 52.2 53.0 52.0 53.1

Textiles & clothing 13.7 23.7 60.2 48.0 54.8 56.1

Timber 7.2 120.2 91.9 98.2 100.2 105.3

Paper & printing 1.9 54.6 33.7 47.1 45.1 49.3

Petroleum refining 19.0 65.0 65.8 94.4 101.4 103.5

Chemicals 6.6 56.7 38.4 129.8 140.0 148.2

Cement 3.0 177.0 206.2 217.0 258.1 258.9

Iron & steel 3.3 356.0 392.8 541.7 581.6 584.5

Non-ferrous metal 9.6 115.8 109.9 88.8 119.8 125.6

Cutlery & metal products 0.5 83.3 99.9 124.0 102.4 116.4

Electrical goods & appliances 1.3 46.3 52.6 29.8 42.9 53.5Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Country Report 1998.

Reference table 12

Minerals production(’000 tonnes unless otherwise indicated)

1992 1993 1994 1995 1996

Gold (’000 kg) 31.4 38.6 43.3 51.3 48.3

Bauxite 498.1 482.5 426.1 513.0 413.2

Manganese 477.7 361.7 269.7 100.0 447.9

Diamonds (’000 carats) 584.5 616.0 426.1 422.7 714.3Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Country Report 1998.

Reference table 13

Production of selected food crops(’000 tonnes)

1992 1993 1994 1995 1996

Cereals 1,255 1,644 1,663 1,805 1,756 maize 731 961 939 1,034 1,008 rice 132 157 162 202 202 millet 133 198 168 209 193 guinea corn 259 328 394 360 353

Starchy staples 10,277 11,250 10,348 11,756 12,761 cassava 5,662 5,972 6,025 6,611 7,111 cocoyam 1,202 1,236 1,148 1,383 1,552 yam 2,331 2,720 1,700 2,126 2,275 plantain 1,082 1,322 1,475 1,636 1,823Sources: Ghana Statistical Service, Quarterly Digest of Statistics; FAO, Production Yearbook; IMF, Staff Country Report 1998.



Reference table 14

Exports(’000 tonnes unless otherwise indicated)

1992 1993 1994 1995 1996

Cocoa beans 223.8 263.7 238.3 236.3 317.6

Cocoa products 19.3 22.8 14.0 13.9 11.4

Gold (’000 fine oz) 995.4 1,210.5 1,435.4 1,689.5 1,485.0

Timber (’000 cu metres) 406.7 727.8 780.0 590.0 n/aSources: Bank of Ghana, Quarterly Economic Bulletin; based on recorded receipts.

Reference table 15

Main trading partners($ m)

1992 1993 1994 1995 1996

Exports fob to: 1,237 1,133 1,474 1,602 1,704UK 119 98 193 235 268Togo 90 107 127 157 185US 32 199 187 184 163Germany 80 178 219 192 154France 20 58 86 125 127Côte d’Ivoire 67 3 3 8 5EU 375 520 799 856 905Africa 208 163 188 235 269

Imports fob from: 2,139 2,056 2,058 2,564 3,188UK 1,368 356 322 416 518Nigeria 305 333 346 388 426US 219 236 137 173 325Germany 192 117 114 193 171Japan 142 82 138 102 108Netherlands 69 91 84 128 97EU 932 853 882 1,105 1,395Africa 405 447 491 607 702Source: IMF, Directory of Trade Statistics Yearbook.



Reference table 16

Balance of payments, IMF estimates($ m)

1992 1993 1994 1995 1996

Goods: exports fob 986.3 1,063.6 1,237.7 1,431.2 1,571.0

Goods: imports fob –1,456.7 –1,728.0 –1,579.9 –1687.8 –1,937.0

Trade balance –470.2 –664.4 –342.2 –256.6 –366.0

Services: credit 118.4 144.7 147.5 150.6 156.8

Services: debit –389.3 –445.3 –420.8 –432.6 –456.4

Income: credit 10.5 11.6 11.8 13.7 23.5

Income: debit –116.7 –123.9 –122.7 –142.9 –163.4

Net transfers 470.3 517.5 471.8 523.2 481.7

Current-account balance –377.0 –559.8 –254.6 –144.6 –323.8

Net direct investment 22.5 125.0 233.0 106.5 120.0

Net portfolio investment 0.0 0.0 0.0 0.0 0.0

Net other investment 253.4 517.6 248.7 355.6 165.1

Financial balance 275.9 642.9 481.7 462.1 285.1

Financing (- indicates inflow)Movement of reserves 122.8 –53.3 –172.1 –256.5 20.4Source: IMF, International Financial Statistics.

Reference table 17

Balance of payments, national estimates($ m)

1993 1994 1995 1996 1997

Merchandise exports 1,063.6 1,237.7 1,431.2 1,571.0 1,481.3

Merchandise imports –1,728.0 –1,579.9 –1,687.8 –1,937.0 –1,752.9

Trade balance –664.4 –342.2 –256.6 –366.0 –271.6

Services (net) –412.0 –383.5 –410.3 –438.6 –442.8

Private transfers (net) 261.2 271.0 263.2 276.1 290.0

Official transfers (net) 256.2 200.8 260.0 205.6 210.0

Current-account balance –559.0 –253.9 –143.7 –322.9 –213.8

Capital inflowsOfficial long- & medium-term (net) 370.2 295.3 135.5 351.2 264.8Private long- & medium-term (net) 106.3 205.8 261.2 70.0 55.4Short-term (net) 153.6 –22.3 62.4 –135.7 –81.5

Capital-account balance 630.1 478.8 459.1 285.5 238.7

Errors & omissions –112.2 –61.1 –66.3 18.5 –0.4

Overall balance –41.1 163.8 249.1 –18.9 24.7Sources: CEPA, Macroeconomic Review and Outlook; Ghana budget speech.



Reference table 18

External debt, World Bank estimates($ m unless otherwise indicated)

1992 1993 1994 1995 1996

Total external debt 4,499 4,880 5,464 5,872 6,202 Long-term debt 3,345 3,666 4,180 4,598 4,955 Short-term debt 414 476 583 625 705 of which: interest arrears on long-term debt 41 56 60 32 62 Use of IMF credit 740 738 700 649 543

Public & publicly guaranteed long-term debt 3,310 3,629 4,148 4,571 4,684 Official creditors 3,013 3,321 3,761 4,113 4,236 Multilateral 2,200 2,404 2,700 2,971 3,118 Bilateral 813 916 1,061 1,142 1,118 Private creditors 297 308 387 458 448 of which: bonds 0 0 0 0 0 banks 5 5 36 119 182

Total debt service 319 306 366 398 471 Principal 198 186 247 301 323 Interest 121 120 119 96 148

Ratios (%)Total external debt/GNP 71.3 87.9 107.9 97.1 100.0Debt service/exports of goods & services 28.4 24.9 25.9 24.6 26.4Short-term debt/total external debt 9.2 9.7 10.7 10.7 11.4Concessional long-term debt/total external debt 57.2 59.3 61.2 63.4 63.0

Note. Long-term debt is defined as having original maturity of more than one year.

Source: World Bank, Global Development Finance.

Reference table 19

Net official development assistancea

($ m)

1992 1993 1994 1995 1996

Bilateral 333.7 312.4 331.8 358.6 348.9 of which: Japan 71.3 83.1 134.8 122.1 110.0 US 27.0 46.0 53.0 54.0 30.0 Germany 24.0 51.2 23.9 43.7 37.1 UK 55.5 36.9 28.9 20.9 33.6

Multilateral 284.5 310.2 220.5 300.9 307.1 of which: IDA 167.6 201.5 171.8 234.3 233.7 EU 62.1 60.9 42.4 53.8 73.7 IMF 0 –11.5 –43.7 –46.1 –61.0Arab countries –4.3 –4.4 –5.9 –6.2 –2.4

Total incl others 612.9 618.2 546.4 653.3 653.6 of which: grants 320.4 320.4 306.5 346.5 315.3

a Disbursements minus repayments. Official development assistance is defined as grants and loanswith a grant element of at least 25%, provided by OECD and OPEC countries with the aim ofpromoting development and welfare in the recipient country.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.



Reference table 20

Foreign reserves($ m; end-period)

1993 1994 1995 1996 1997

Foreign exchange 385.3 554.3 669.2 801.5 453.6

SDRs 0.5 4.2 2.4 2.2 3.1

Reserve position in the IMF 23.9 25.4 25.8 25.0 23.7

Total reserves excl gold 409.7 583.9 697.5 828.7 480.4Source: IMF, International Financial Statistics.

Reference table 21

Exchange rates(C per unit of currency; period averages)

1993 1994 1995 1996 1997

$ 649.1 956.7 1,200.4 1,637.2 2,050.0

SDR 1,125.9 1,536.7 2,154.3 2,522.7 3,066.5

£ 968.7 1,465.3 1,894.9 2,556.8 3673.4

DM 390.8 589.5 837.6 1,088.0 1293.5

FFr 112.7 172.3 240.5 320.0 384.4

¥ 5.9 9.4 12.8 15.0 18.6

CFAfr 2.3 1.7 2.4 3.2 3.8

Naira 29.4 43.5 54.8 74.8 102.5Source: IMF, International Financial Statistics.

Editor: Piers HabenAll queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023



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