25 February 2014

Ghana: Smith - Natural Resouces Not Fully Utilized

interview

Ghana's President John Mahama on Tuesday (25.02.2014) presented his state of the nation address. Mahama's speech largely focused on the economy and included an appeal to buy 'made in Ghana' products.

Ghana's cedi currency has lost nearly a quarter of its value since last year. The resource-rich West African nation has also been struggling with a ballooning national budget deficit made worse by the drop in gold prices, one of Ghana's main exports.

DW talks to Patrick Smith  the Editor of Africa Confidential in London.

Was President John Mahama honest with Ghanaians on the state of the country's economy?

Well, I think he was as honest as he could be without perhaps accepting enough blame for the situation. No one is going to say that Ghana's economy is in a good condition at the moment, there's no question about that. Mahama has presided over astronomic rises - over 60 percent each in the electricity and water tariffs. And the services of both water and electricity for the general public have been pretty intermittent over the past year. At the same time the cedi currency has fallen very sharply against the dollar and the prospects for the rest of the year, given the end of the US economic and financial stimulus program, look like the cedi is going to fall further. So there are big difficulties and I think he was honest in his acknowledgement of these difficulties. But I think he wasn't probably as straightforward as he should have been about the government's responsibility, and essentially taking some blame for the way things have been made worse. One of those things is the big budget deficit which is both driving inflation and weakening the national currency.

During his speech, the president launched the "Buy made in Ghana" campaign, saying Ghana's fundamental economic problem was that they weren't making use of what they have. Is this initiative the solution to the country's economic woes?

I think actually it is very important and in some respects it is an area of success for the government. Twenty years ago Ghana imported most of its rice. Now if you go around any of the main cities like Accra, Takoradi or Kumasi, you will find that there's a lot of rice grown in the northern region of Ghana now for sale on the streets. It's cheaper and a lot of people say it's much better than the imported rice from places like Thailand. So I think on the agricultural side, there is an increasing awareness of the country's agrarian riches and people want to eat local foods and make sure that the other foods they eat like rice are also grown locally.

But on the big bucks level, that is the added value manufacturing and industry level, it hasn't been successful. That is partly because Ghana, like many African countries, in the 1980s and 1990s was effectively de-industrialised by the structural adjustment policies advocated by the World Bank and the International Monetary Fund. And it has yet to develop a proper industrial response to that. So it's got to go back, I think, and use things like the oil and gas industry which it is now in the process of developing and use those to power a new wave of industrialisation. And that's not going to be for tomorrow, it is going to have to be a five, 10 or 20 year program. So you have got, for example, a new gas plant which is running behind schedule but when it is finished it will be making fertilizer which will go into agriculture and be the basis of an agro-allied industry.So there are plans in process but they will take a long time to work through and probably Mahama will have finished his term by then.

Mahama also announced government plans to implement free secondary education. Good as it sounds, isn't such a program going to put a greater burden on the overstretched budget?

It will and it is very interesting that he announced those plans because during the elections the strongest policy of the opposition, the New Patriotic Party (NPP) was to promise free secondary education to all Ghanaians. NPP candidate Akufo Addo pushed that policy around the country and it proved very popular. It really helped the oppposition win votes in places where they were not popular before. So it's a vote winner but it's got a cost. I think the questions that the ruling party, the National Democratic Congress, raised at the time of the election are still valid. Secondary education is very good but what is the quality of that education and how are the beneficiaries of that education going to find jobs within the wider economy? Is this the best thing we can do, given our resources at the moment? I don't think President Mahama really answered those questions in the state of nation address. It looked to some people a bit like starting electioneering a bit early. I think there needs to be much more detail on secondary education. But there is absolutely no question that most Ghanaians are very strongly in favor of that and it will be a very popular policy if the government can implement it seriously and give poor people access to free secondary education.

Ghana itself is very in rich in oil. How would you explain to an ordinary Ghanaian why he or she now has to pay more for a bus ticket?

That's a big dilemma for the government. It has failed to get that across.The fact of the matter is that the natural resources of Ghana are not being used then developed in way that links up with the wider economy. So you've got these gaps right across the economy. Ghana is still dependent on bringing in refined petroleum products from outside the country. It does have an oil refinery, but that refinery has been mismanaged and is constantly in debt and has been underperforming. Often they can't afford to buy the crude oil they need to refine, although Ghana itself is producing its own oil. Now the plans for the next five to 10 years are to address those issues and build another refinery and in the president's state of the nation address he spoke about bringing in new investors for the existing refinery at Tema. So i think we are going to see some changes on that but, as you say, the average person asks, why am I paying so much for petrol when we are now an oil-producing country? And of course, when you put up the price of petrol and diesel in Ghana, everything else gets more expensive because you have to move it around the country. I don't think the government really explained that too well and I think people are going to be frustrated. They see Ghana as a country that wins a lot of praise around the world, that is one of the biggest gold producers in Africa, it's the second biggest producer of cocoa in the world and now it's got oil and gas. They think with all those resources they should be living in a very rich country and they want to know what's happened to the money.

Patrick Smith is the Editor of Africa Confidential in London

Interview: Chrispin Mwakideu

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