New Report Reveals Improvements To Infrastructure And Increased Access To Finance Are Best Ways For Ghana To Increase Prosperity
A new report on economic openness in Ghana by the Legatum Institute, to be launched at an event with the African Center for Economic Transformation (ACET) on Thursday 12th December, emphasises that furthering investment in infrastructure and increasing access to finance are Ghana’s greatest opportunities for enhancing future prosperity.
The report reveals that Ghana ranks 91st globally, and 10th in Africa, in the Global Index of Economic Openness. Its strongest performance is in Governance, for which it ranks 55th in the world, reflecting the strong democratic traditions built up under the 1992 constitution, and making it one of Africa’s leading nations.
Ghana’s Market Access and Infrastructure has improved more than any other pillar over the last decade, driven by improving communications, border administration, and access to global markets. In addition, Enterprise Conditions are stronger due to a lighter regulatory burden on businesses and a more flexible labour market.
The report shows that these improvements have enabled more economic openness in Ghana, but that despite this, the country has improved at a slower rate than its peers. Ghana now ranks just 115th in the world for Market Access and Infrastructure, with high costs and low bandwidth capacity for communications.
While the development of the oil sector, as well as exports of gold and cocoa, will make Ghana one of the world’s fastest growing economies in 2019, performance on resource availability remains both a challenge and an opportunity for Ghana. It currently ranks 124th in the world, with reliability of the electricity supply one of the key challenges still to be overcome, and transport has deteriorated over the last decade, with roads over-utilised and rail under-utilised.
In addition, Ghana has declined 12 places for its Investment Environment in the last 10 years, and now ranks 106th globally. Investor Protections are a weak point for the country, ranking just 130th, and improvements are being held back by ongoing challenges around international investment and access to finance for businesses.
The report suggests that removing the current barriers facing businesses – especially, small and medium enterprises – is an opportunity for Ghana to generate increased economic openness. In addition, removing restrictions on international investments would enable a significant inflow of capital and, where needed, allow foreign-based expertise to enter Ghana.
Dr Stephen Brien, Director of Policy at the Legatum Institute and author of the report, commented: “Prosperity is much more than material wealth, but without an open and competitive economy it is very challenging to create lasting social and economic wellbeing. This is why we view economic openness as so important.
“It is clear that Ghana has made significant progress over the past decade. As the first country to ratify the AfCFTA earlier this year and host of the Secretariat, it is well placed to play a leading role in the development of regional and continental trade policy and create greater economic openness across this emerging market of more than a billion people. There is clear cause for optimism, as the Ghanaian Government in recent years has implemented reforms in areas such as insolvency and banking, and shown some commitment to growing regional trade.
“However, Ghana has not yet grown to meet its potential. Trading goods within and outside of the country is constrained by poor infrastructure, high tariffs, and long delays and high costs at the border. Further investment in fixed broadband, transport infrastructure, and reducing the friction at borders is critical to facilitate trade. Given fiscal constraints, public-private partnerships could be used to increase the available transport funding.”
The report highlights that since its democratic transition in 1992, Ghana has become a success story in Africa by combining political stability and growing prosperity. It has developed a robust set of democratic institutions, and since 1992, its per capita income has tripled. Strong Governance is underpinned by largely respected Executive Constraints and strong Political Accountability, for which the country ranks 36th and 46th respectively.
However, the day-to-day operations of the Government are limited by corruption and inefficiencies, with Ghana ranking 107th for Government Integrity – a decline of 21 places in the last 10 years. The report shows that a renewed focus on countering corruption could bring greater efficiency to the Government as well as better outcomes for the economy with a focus on fiscal sustainability.
Dr Brien remarked: “While Ghana is a stable democracy, it could improve its governance further by continuing efforts to reduce corruption and improving government effectiveness through a results-based culture to focus on the delivery of services and fiscal sustainability.
“The current administration has taken strong first steps to address corruption, including setting up an Independent Prosecutor, but sustained action will be necessary to root out both the perception and reality of corruption. The good news is that Ghana’s history and development for nearly three decades has shown that, with the requisite political will, it can deliver growth underpinned by strong governance.
“It is our conviction that greater economic openness will bring greater prosperity to Ghana, and we have been encouraged by the President’s recent announcement of his vision of Ghana beyond aid. We hope the country will seize the opportunities available to build a more prosperous future for all Ghanaians.”
Commenting on the report, John Asafu-Adjaye, Senior Fellow and Head of Research at ACET, said: “The report shows that Ghana has made giant strides towards economic openness and greater prosperity. Ghana is now counted amongst the leaders in Africa. The report clearly maps out the steps required to lift Ghana to the next level of economic transformation."