07.09.2006 Feature Article

Economic growth and Poverty in Ghana

Economic growth and Poverty in Ghana
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On 6th March 1957, soon after assuming the reigns of government from Britain the CPP government under Kwame Nkrumah instituted a policy of social transformation in Ghana.
Nkrumah saw education, which lies at the heart of social change, as a vehicle to transform his homeland but also as a self empowerment of the poor. The underlining concern that was paramount behind his thinking was the depressing and hopeless situation then facing the northern cities, from Kintampo to Wa and high level of illiteracy among the citizenry.

The period saw significant growth in low cost housing and education (taking into consideration the low population at the time). Nkrumah's method of combating poverty and empowering the poor was through education and social infrastructure. And what better group to start with than the boys and girls of Ghana, many of whom joined the Young Pioneers Movement in large numbers. Instantaneously many boys became the first in their families to go to school and proud to be seen in the Movement's uniform.

Nkrumah wanted to use education to defeat poverty-related social discriminatory processes and the elite behaviour and attitudes. Nkrumah's policy of public spending at the time was primarily aimed at improving the quality of life through his massive investments in roads, housing, water and other amenities.

The challenges of today are far different from the challenges that Nkrumah inherited some 50 years ago. Ghana's problems have been exacerbated by a number of reasons.

1. As part of the third world countries effort to catch up with the west, most countries participated in study abroad scheme, where citizens were sent abroad to study with the hope that they will return home with the knowledge acquire to help in the development of their homeland. Ghana participated in and continued this practice well after Nkrumah had left the political scene. The political upheavals in the 1970s and the African economic crisis in the 1980s – also known as the “Lost decade for Africa” meant that Ghana lost her nationals to the developed world. Apart from Iran, Ghana was the only third world country that lost over 99% of her skill nationals.
2. The 1980s crisis affected most West African countries so much so that most began to deport non nationals, including second and third generations born in Diaspora back to their countries of origin. Again Ghana suffered most as her nationals, some pregnant, including the old and the very young were expelled to Ghana.
3. The crisis meant that most of the professional remaining at home decided to leave, almost bankrupting the country. Thus the Ghanaian government under the leadership of Flt Lt Rawlings was force to go to the IMF/World Bank, and thus began Ghana's road to recovery under the Bank/Fund Structural Adjustment Policies.
4. Ghana's collapse in the 1980s meant that they had no choice but to adopt the Structural policies in its entirety. That meant implementing all the reforms proposed. Here it must be emphasised that the Ghanaian government was not forced to accept all the Bank/Fund proposals, but the Rawlings government did anyway.
5. The 1970s and 1980s became a watershed in Ghana's infant history. Although Ghana did not suffer civil war, she still missed the golden opportunity to transform her economy into middle income status like Malaysia has done. The contributory factors as to why Ghana did not made the grade before the end of the last century is still debatable. The gender related differences in relation to poverty were significant during the economic crisis. Thus over 80% of those who were expelled were women and children. Most of the men found their way to Europe/Australia –New Zealand/North America. Again at home those who were left behind were mostly women and children. Many children have to abandoned school to fend for themselves because their families could not afford their school fees. Most boys and girls, some as young as 12 years old became breadwinners of their families. The country was on the verge of total collapse; however Rawlings Charisma and his newfound cordial relations with the international community and Financial Institutions, including the Bank/Fund saved Ghana. Instantaneously Rawlings became the darling boy of the West and Ghana was totted as an “African Success Story” and “An Economic Miracle”, thus joining the group of “Economic Miracle” countries such as South Korea, Malaysia, Thailand and Singapore.

There is still debate about the benefits of the Bank/Fund structural reforms; however what cannot be denied was the policies' impact on health care delivery and tertiary education. The introduction of user fees into health and education affected the poor most. These also increase the income inequality between the elite rich in the urban areas and the rural poor. There was significant increase in both the urban and rural poor as most families redrew their children from school because they could not afford the school fees. At micro level girls suffered most as majority were withdrawn from school to help in the home or farms. Others were sent to the cities to live with relatives and serve as servants. A whole generation of girls missed the opportunity to be educated. Their plights were highlighted by Nana Konadu Agyeman Rawlings and Hilary Clinton (when Clinton was still at the White House) at international conferences. The problem was not limited to Ghana alone but throughout sub-Saharan Africa. In some neighbouring countries girls were sold into slavery.

Social spending that traditionally focused on sectors of extreme poverty were cut to enable the Ghanaian government to honour her external debt obligations. Thus opportunistic diseases that were previously treated under the free health scheme became fee payable, and this cost the lives of most Ghanaians, majority were the poor, women and the old. During the “lost decade” (1980s) every African child born came into the world owing Bank/Fund and the International Financial Institutions $400.

Ghana's “successful” implementation of the Bank/Fund structural adjustment programs left a whole generation of Ghanaians on the scrap heap of poverty. Ghana was hail as an “African Success Story” and “An Economic Miracle”. Throughout the “miracle decade” the distributive mechanisms favoured the rich minority. Ghana's traditional industries were either sold off to TNCs (Trans National Corporations) or were left to die and the industrial base collapsed, throwing thousands of workers into poverty.

Poverty thus became the number one issue that confronted the Ghanaian government. Most scholars put the blame on the impact of the structural policies for Ghana's economic woes; others credited the policies for opening up the economy as well as linking into the Ghanaian economy the large skill migrants that Ghana lost. This writer was among those that congratulated Rawlings for taking the bitter pill and signing up to be the first sub-Saharan African country to adopt the structural programs. The injection of in flows into the economy from Ghana's nationals abroad gave hope of economic revival. The “aid” fuelled recovery was “impressive”.

During the miracle decade, Ghana achieved an impressive economic growth of 5% year - on - year. This “success” gave the skill migrants that Ghana lost in the “lost decade” the hope to invest in their homeland. This writer studied Ghana's Skill labour that left their homeland during the 1980s crisis. The group studied included nurses, doctors, lecturers, engineers, seasoned market traders and businessmen, artisans and ex student leaders. The study was conducted at the height of the “Miracle years” when Ghana was much talked as a renaissance country. The inflows from these nationals into their homeland were crucial and that enabled many businesses to have confidence in the Ghanaian economy. As much as people may despise Rawlings, majority gave him credit for turning the country round and thus the confidence gained in the economy.

However the uses of the inflows and the massive corruption that followed became another source of studies for academics. The remittances from the skill nationals were going into setting up of businesses and real estate. It shifted from the traditional uses of remittances such as paying for school fees and looking after those left behind. The inflows became the third largest foreign exchange earner for Ghana, overtaking most traditional exports. It is now estimated that about $4 billion US dollars is remitted to Ghana annually. It uses has still not been made clear by the Ghanaian authorities, though they have publicly acknowledge its importance to the economy.

This writer was among the first to argue that a percentage of the remittances should be set aside for social development. In Turkey and India, part of the remittances from nationals abroad are as set aside for social development such as street lighting, schools for the community and as soft loans for small enterprises. In India and Sri Lanka, women left behind were able to set up profitable small scale cottage industries, the sort of indigenous industries highlighted by Nana Addo Danquah Akuffo Addo in his speech (manifesto) recently.

Poverty in certain parts of Ghana is marked. In the 3 Northern Regions, the Central Region (especially in Cape Coast Municipality where this writer's mother comes from) and this writer's home town of Sekondi were classified as ghost towns. Most of the able bodied young men and women are all gone leaving behind the old and the young. Sekondi once a thriving metropolis and a magnet for young seafarers have been left to go waste.

In some parts of Ashanti and Eastern regions, HIV/AIDS pandemic is claiming lives in large numbers. Of all the candidates who have declared to contest the 2008 Ghana's presidential elections, only 3 candidates had come out boldly with policies to address poverty. In their manifestos, Osahene Kojo Boakye Djan, Nana Addo Danquah Akuffo Addo and Dr Arthur Ebo Kobina Kennedy spoke about dedicating a ministry to fight poverty and create employment for the large jobless youth roaming the towns and cities.

Papa Owusu Ankomah who is yet to declare his candidacy is another politician who wants to fight poverty by instituting policies that gives the poor the opportunity to become more productive. John Dramani Mahama who is one of the young and rising stars in Ghanaian politics, and yet to declare, like Papa Owusu Ankomah, has put poverty at the top of his development agenda.

The “Miracle years” (1990s – NDC era) show no reduction of social inequality in Ghana. Although Ghana maintains growth rates of 5% per year throughout the miracle years and the years after 2000 (NPP era), these appear not to have benefited the poor in the society.

The harsh economic restructuring process (Structure Adjustment Programs under Rawlings and HIPC under Kuffuor) that Ghana has been experiencing since the “Miracle years” has defined new winners and losers both among companies and individuals. The informal sector has seen a growth in job creation and thus it is important to devise measures where the sector can be induce into the tax bracket and improve job quality for the workers.

Yes, from the period 2000 to 2005 Ghana was able to reduce inflation from over 40% to about 15%; this has not brought poverty down as had been anticipated. Lower inflation has stimulated a genuine increase in earnings and increase in investment and savings; hence what is needed is a concerted effort at reducing rural poverty. Thus it is incumbent on the media to question the presidential aspirants as to how they are going to address poverty. Although this writer does not support any one candidate, however having had the opportunity to interview candidates and/or their supporters only Nana Addo Danquah Akuffo Addo has shown the willingness to seriously set firm policies to address poverty.

Until poverty is defeated or reduced to minimum, Ghana's cherish ambition of achieving middle income status by 2015/2020 would be an illusion despite what the IMF/World Bank economists say. The root causes of poverty lies in the persistent poverty among the rural people and lack of investment. Investment must be directed away from Accra to the regions, and on this issue this writer agrees with Nana Addo Danquah Akuffo Addo's indigenous development. Although this writer is not a great fan of the Foreign Affairs Secretary, he seems to be the one with the right policies to seriously address the enormous problems that Ghana face.

This writer in an earlier essay on remittances argue for a $1/£1 levy on inward remittances specially earmarked for social development and promotion of indigenous industries. The Ghanaian government should also seriously consider imposing high tariff on imported food and textiles in order to safeguard local produce.

The government should be bold to assure citizens, both at home and Diaspora, the uses of the $1/£1 levy on remittances, transparency and the composition of the management team, their roles and the projects to be undertaken. The team should be made up of technocrats and economists/bankers with no political affiliation but rather have the interests of Ghana at heart.

No major infrastructure development has been undertaken since Dr Nkrumah left the political scene. Ghana's railroad, motorways, hospitals, schools, rural electrification and drinking water needs massive investments. Instead of going hand in bowl to the Fund/Bank, the Ghanaian government can raise revenues by way of national investment schemes…..selling long term bonds to its citizens every where.

Guy Foxx and few others proposed many innovative schemes for financing public infrastructure as well as encouraging citizens to save. There are competent investors/economists like Kwame Pianim, Ken Ofori Atta, Ohene Kane, Dr Kwesi Botchwey and few others who can preside over any investment vehicle to raise funds for these schemes. This takes us back to an earlier essay by Araba Thompson (Ghana Web feature article 8th December 2005 – Ghana, A country of Misplaced Priorities and Visionless Leaders). In the said article Araba argue that Ghana lacks leaders who are capable of leading the country……. And in another related article by on the question of leadership and the Structural Adjustment Program by Kimberly Louis (Ghana Web feature article 30th April 2005), Kimberly's argument, like Araba's relates to lack of strong leadership due to the massive brain drain that Ghana suffered in the 1980s and 90s. The return home of the likes of Pianim, Ofori Atta, Ohene Kane, Dr Mahama, Dr Kobina Kennedy, Osahene Kojo Boakye Djan, Dr W.Brobbey, Alan Kyeremanten and others to either participate in local politics or set up businesses and help towards the development of their homeland, defeats Araba and Kimberly's argument. The notion that Ghana lacks competent leaders is a fallacy. It is true that many left the homeland at the height of the economic crisis, but the “miracle years” and the pull factor was such that majority are returning home, most with high level of skills and huge portfolio of investments to help their motherland. Many benefited from the “free” education policies instituted by Dr Nkrumah and kept in place by successor governments until the early 1990s.

The current crop of leaders vying to lead the country have all the got the qualities to be successful. Those that this writer has followed over the last few months including Papa Owusu Ankomah, Nana Addo Danquah Akuffo Addo, Dr Kwame Addo Kuffuor and Dr Kobina Kennedy all of the NPP, Mr John Dramani Mahama of NDC and Osahene Kojo Boakye Djan of the Nkrumaist group have got the abilities to rule Ghana.

Can Ghana be able to reduce poverty to the level seen in most Asian NICs (Newly Industrialised Countries) and achieve middle income status by 2015? The answer sadly does not lie with the voters (they only vote by the choice presented to them by the parties) but with the political elite. Have the political elite got the leadership skills to take hard and painful decisions in other to reduce poverty and achieve this noble aim of middle income status by 2015? Araba Thompson and Kimberly Louis may or may not be right, but time will tell.

Peter Jeffrey

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