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Ghana: The Economy, Ghana and the Cedi – A Rejoinder

I refer to an article written by Dr Kwame Osei, titled “Ghana: The Economy, Ghana and the Cedi”, which was published at Modern Ghana website on or about 18 June, 2012.

The objective of this article is to correct some misinformation contained in the article under reference. In that article, the author, Dr Kwame Osei, made a lot of interesting but not well-founded analysis and observations. I will not attempt to pin-point all such issues.

Notwithstanding any issues in Dr Osei's analysis of the cedi; I will concentrate mainly on his discussion of the economy of Ghana under the sub-heading: “The Economy.” In his discussion of the economy, the author, Dr Osei, made some comments that are not true and valid and that need to be corrected for the benefit of the author and the general populace.

The author wrote:
A history lesson for the readership - before 1966 Ghana was on the verge of becoming a developed economy.

This was due to the sterling leadership of Dr. Kwame Nkrumah who recognised the concept of self determination was key to economically emancipating the country from the enslaved colonial one that he inherited.

The comment above is absolutely false. Before the coup d'état that overthrew the Osagyefo Dr Kwame Nkrumah's Convention People's Party (CPP) Government on 24 February, 1966 Ghana was never “…on the verge of becoming a developed economy” as Dr Osei wants us to believe. On the contrary, the country's economy was sinking. It was almost bankrupt. I was in the Secondary School then; there were shortages of almost everything under the sun. Essential commodities like sugar, milk, rice, wax print, basic foodstuff like plantain, yams, maize, cassava and even onions, pharmaceutical products were all in short supply. This led to such social evils as hoarding and profiteering. Living was very hard for everybody, perhaps with the exception of the Ministers of State, the Regional Commissioners, the District Commissioners and the top hierarchy of the CPP (then labelled as “the Party”) and their families, relations and friends. However for the man in the street, living was just unbearable. Those in the Armed Forces (the soldiers), the Police Service and even Medical Officers, Lawyers, Engineers and other Professionals were all doing it tough. Productivity in both agricultural and industrial sectors were low. The productivity issue was lamented upon by the President in his 1965 May Day nation-wide broadcast (Ghanaian Times, 1 May 1965, p1). Ghana's economic problems started as early as 1961, when it became necessary for the Government to introduce Price Controls, nationally advertised in the Ghanaian daily newspapers (Ghanaian Times, 27 August, 1961, p1)

Additionally, in 1965, the economic situation was so bad that the Government had to invite the International Monetary Fund (IMF) later to be followed by the International Bank for Reconstruction and Development (World Bank). In May 1965, the nation was informed that an IMF fact-finding mission was due to arrive in the country for a short visit and that during the visit they would conduct a survey of Ghana's development projects to enable the IMF to assess and finance future projects (Ghanaian Times, 4 May 1965, p1).

Then in August 1965, the World Bank sent a twelve-man staff mission to Ghana on the invitation of the Ghana Government. The World Bank Mission was expected to be in the country for a duration of four or five weeks. This World Bank Mission was headed by Mr J. H. Haralz, an economic adviser and head of the Planning Commission of the Government of Iceland. The aim of the World Bank Mission was to study Ghana's development programmes and public investment. The Seven-Year Development Plan, an important Government programme, was to take centre-stage. Just before the arrival of the Mission, an Executive Director of the Bank, Mr Abderrhman Tazi of Morocco came to Ghana to prepare the ground for the coming of the 12-man World Bank mission. The newly appointed Governor of the Bank of Ghana, Mr Albert Adomako, in proposing a toast at a luncheon he gave in honour of Mr Tazi said that it is his hope that the studies of the 12-man mission would lead to a good appreciation of “our problems.”

The Governor mentioned “our problems” and what were those problems, if not economic?

Mr Tazi responding to the toast said that the dispatch of the Mission underlined the desire of the World Bank group to assist the Government of Ghana. In fact Mr Tazi said:

“I can assure you that the World Bank is anxious to help the Government of Ghana…” (Ghanaian Times, 21 August 1965, p1).

In the current world economic order, any country that invites the IMF and or the World Bank to its shores is indicative that all is not well with that country's economy. Countries that invite such International Institutions to review their economic developments and finances, generally do so as a last resort because of national pride.

It is also not right to assert that:
“…due to the sterling leadership of Dr. Kwame Nkrumah who recognised the concept of self determination was key to economically emancipating the country from the enslaved colonial one that he inherited.”

It is true that our first President wanted to industrialise the country to achieve rapid growth but some, if not most, of the factories he established were not well-planned and resourced. For example, Dr Nkrumah established a 24 Million cedis Slaughtery and Meat Canning Factory at Bolgatanga in 1965 but the Factory did not have its important raw materials - cattle - needed for production. It was not until this bottleneck had been exposed by a Ghanaian Times columnist, one Mike Anamzoya on 13 August 1965 that the Government moved to ratify the situation by releasing 216,000 cedis (90,000 pounds sterling) for the purchase of cattle for the Meat Factory

(Ghanaian Times, 17 August 1965, p1).
Another example is the State Cannery at Nsawam which was reportedly established in 1959. Originally this Cannery was meant to produce tomato puree. The supply of its basic raw materials – tomatoes – proved to be a big bottleneck for the Factory. In an article published in the 4 September 1965 edition of the Ghanaian Times, a columnist, Kofi Quantson, gave a couple of reasons why the Cannery was operating at heavy losses. Kofi wrote:

• Firstly, the nearest tomato producing area was some 70 miles (about 112 kilometres) away.

• Secondly, the tomato season was only for two months.

As a consequence of the inadequacy of the supplies, there were long fallow periods and heavy losses. In 1961 the losses stood at 140,000 cedis (note in those days the cedi had value). The Cannery eventually had to diversify its products. As at 1965, the Cannery products included the following: marmalade, jam, aperitif, and tomato puree. Another problem the Cannery faced was getting its finished products on the market. It had no reliable marketing agency to distribute and retail its products. Apparently the big retail and wholesale entities in Ghana were unwilling to make big orders for their products (Ghanaian Times, 4 September 1965, p7).

The above two examples are enough to illustrate the lack of strategic planning in allocating some, if not most, of the factories built during the Nkrumah era. Some of the factories were established not based on any sound economic reasoning but to achieve some political expediency. As the allocations of some of the factories were not done to achieve economies of scale, they tend to run at huge losses and be dependent on Government subventions and subsidies to keep them in operation. As a consequence of lack of proper strategic planning, poor management and co-ordination most of the Nkrumah factories were found not to be economically viable as a consequence most of them either folded up or were sold to private agencies after the 1966 coup.


I have to state that any country that has to institute price controls in the wake of shortages of basic household needs could not be on the “on the verge of becoming a developed economy” . In developed economies, there are no shortages of basic household needs nor are there such social evils as hoarding and profiteering which was the order of the day in Ghana as early as 1961 till the overthrow of the Nkrumah regime on 24 February 1966. This cannot be “sterling leadership” – can it?

As stated earlier, any country that invites the IMF or the World Bank to its country to review its development projects, banking system and other vital economic institutions and projects so as to get foreign aid or loans to finance its programmes and projects cannot be “on the verge of becoming a developed economy” . Such a country must be in very serious economic problems that it cannot do it on its own without the help of huge external aid. That is what the IMF and the World Bank are there for – basically to assist developing countries having serious economic and developmental problems. That was what Ghana found itself in under Dr Nkrumah's “sterling leadership” before his overthrow on 24 February 1966.

Another important reason why Ghana could not have been “on the verge of becoming a developed economy” just before the fall of the Nkrumah regime is that the Gross Domestic Product (GDP) and the per capita income of Ghana in 1965 were much too small compared to the developed economies in that period. According to the Development Centre of the Organisation for Economic Co-operation and Development (OECD) publication of 2003 entitled “The World Economy Historical Statistics” by Angus Maddison, Ghana in 1965, with an estimated mid-year population of 8.0 million had a GDP of 11,154 million dollars and a per capita income of 1,393 dollars. When these economic indicators are compared with a developed country of a similar population size, for example, Sweden, we see the difference. From the same OECD sources, Sweden in 1965 had a corresponding population of 7.7 million and a GDP of 83,643 million dollars and a per capita income of 10,815 dollars (in 1990 international Geary-Khamis dollars). World Bank sources are not quite different from that of the OECD's.

Elsewhere in Dr Osei's article, he lamented the terms and conditions the IMF imposed on Ghana in the 1980s in order that Ghana could put its economy on an even keel. I have to mention in passing that IMF and World Bank staff are top professionals in their fields of specialities.

The terms and conditions that the IMF imposed on Ghana in the 1980s to get its economy in the right shape was not the first time in the country's history that the IMF had to administer such a “bitter medicine” on Ghana. The first happened during the Nkrumah era. In 1965 the economy of Ghana was in such dire straits that the Government had no option but to invite the IMF and the World Bank to the country to review its development plans, notably, the Government's ambitious Seven-Year Development Plan, the 1965 Budget, the banking system and other economic institutions. The IMF recommended a number of difficult economic measures including the removal of Government subventions to some State Enterprises, removal of subsidies on some goods and services and drastic cut in domestic consumption and a reduction of the cocoa price paid to farmers. The Nkrumah Government, revolutionary as it claimed to be, had no option but to accept and abide by all the IMF recommendations. As part of the implementation of the IMF recommendations the Finance Minister, Mr Kwasi Amoako-Atta, on 10 September 1965 introduced a Supplementary Budget to the National Assembly, increasing tariffs and duties on certain goods and services in order to raise additional revenue to defray part of the expected huge budgetary deficit contained in the 1965 Budget Statement (Ghanaian Times, 11 September 1965, p8).

Some of the fruitful projects completed by Dr Nkrumah that proved to be of lasting benefit to Ghana included the Volta River hydro-electric development project at Akosombo (the Akosombo Dam), the Tefle Bridge over the Lower Volta, the Tema Port and its township, the Kwame Nkrumah University of Science and Technology at Kumasi and others. The 17.5 million pounds sterling Tema Port/Harbour, believed to be the biggest artificial port in Africa, was opened by Dr Nkrumah in February 1962. Work on the 500-acre harbour began in 1952 (Ghanaian Times, 1 February 1962, p1). The Akosombo Dam, dubbed “Osagyefo's great dream”, and “a purely Governmental enterprise” was by far the most important project that Dr Nkrumah did. The Dam was financed by loans to the tune of 35 million pounds sterling. The principal lenders were the World Bank, the United States of America and Great Britain (Ghanaian Times, 10 February 1962, p1). In January 1962, President Nkrumah launched the Volta River Development project at Akosombo. The Dam project was completed in four years and was inaugurated by the President on 22 January 1966, about a month before his overthrow in a military coup d'état in 24 February 1966.

Kwaku Amoo-Appau
2 July 2012

Email: [email protected]

Note: I am currently doing a research into the old editions of the Ghanaian Times at Australian National Library, Canberra, in connection with a project that I am doing on Ghana. As part of that project I intend to give a brief history of Ghana from 1960 to 2008. This book, I hope will give much valuable and accurate information of the motherland that may benefit students, teachers, and the general public alike. Be on the lookout the publication, maybe next year, if everything is well.

Disclaimer: "The views/contents expressed in this article are the sole responsibility of the author(s) and do not neccessarily reflect those of Modern Ghana. Modern Ghana will not be responsible or liable for any inaccurate or incorrect statements contained in this article." © Kwaku Amoo-Appau

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