Country Report 3Rd Quarter 1996 © the Economist Intelligence Unit Limited 1996 2 Ghana

COUNTRY REPORT

Ghana

3rd quarter 1996

The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 40 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group.

London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638

Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202 DIALOG (USA) SilverPlatter (USA) Tel: (1.415) 254 7000 LEXIS-NEXIS (USA) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.171) 930 6900

Copyright © 1996 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1350-7052

Symbols for tables “n/a” means not available; “–” means not applicable

Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Ghana 1

Summary

Ghana 3rd quarter 1996

August 13, 1996

Political and economic structures pages 2-3

Outlook: The president, Jerry Rawlings, appears set to win December’s election, thanks to opposition divisions over leadership issues. The inflation picture is improving but the fiscal outlook remains uncertain. pages 4-6

The political scene: The government has stepped up its preparations for the presidential and legislative elections. Opposition parties have protested at higher deposits and the reopening of the electoral register. Six political parties appear set to contest the polls; two have been disqualified. The Nkrumahist PCP-NCP alliance has named its presidential candidate: the current vice-president, Kow Arkaah. Factions have become identifiable within the ruling NDC. pages 6-11

The economy: The inflation rate has slowed. A report in a British newspaper has painted a gloomy long-term prognosis for the economy. There is conflict- ing information on new investment, but investment start-ups appear good by regional standards. pages 11-14

Agriculture: Bullish cocoa forecasts have been vindicated, and the 1996-97 outlook is good. Prospects for 1997 earnings appear reasonable. Donor pressure in favour of liberalisation has caused a row over the preservation of cocoa quality. Cocobod has maintained its anti-deregulation position. Ghana is processing an increasing amount of cocoa at home and selling more by-products abroad. pages 15-17

Mining: AGC’s profits are down 3%, but hedging has saved the day. The company continues its expansion drive. More investors have arrived from Australia and Canada, and existing Australian investors are expanding their stakes. pages 17-18

Infrastructure and health: The World Bank is preparing a $50m loan to back reforms in the health sector. The government has announced plans to license a second national telecoms operator to compete with Ghana Telecom, as the government’s two-year telecoms programme continues. page 19

Foreign trade, aid and payments: Debt rose only marginally in 1995, although central bank data conflict with World Bank figures. An Accra-based think-tank has shed light on smaller export sectors; non-traditional exports have expanded, with the EU the leading destination. Switzerland has been the major export destination in the first quarter. Tourism earnings have risen, but analysts have stressed remaining deficiencies. pages 20-22

Statistical appendices pages 23-24

Editors: Andrew Manley; Gill Tudor All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 2 Ghana

Political structure

Official name: Republic of Ghana

Form of state: unitary republic

Legal system: a new constitution, based on the US model, was approved by referendum in April 1992

National legislature: Parliament; 200 members elected by universal suffrage every four years

Last elections: November 1992 (presidential); December 1992 (legislative)

Next elections due: December 1996 (presidential and legislative)

Head of state: president, elected by universal suffrage for a maximum of two terms; currently Jerry Rawlings

National government: cabinet, appointed by the president in April 1993; reshuffled in March 1996

Main political parties: Progressive Alliance (PA), the ruling coalition, consisting of the National Democratic Congress (NDC—the majority party) and the Every Ghanaian Living Everywhere (EGLE) Party. Opposition parties include: the New Patriotic Party (NPP); the People’s National Convention (PNC); the National Convention Party (NCP); the People’s Convention Party (PCP)

Vice-president Kow Arkaah

Secretaries of state defence Mahama Iddrisu education Harry Sawyer employment & social welfare David Sarpong Boateng environment, science & technology Christine Amoako Nuamah finance, economic planning, mines & energy Richard Kwame Peprah food & agriculture Steve Obimpeh foreign affairs, justice & attorney-general Obed Asamoah health Eunice Brookman Amissah information Kofi Totobi Quakyi interior Emmanuel Osei Owusu lands & forestry Kwabena Adjei local government & rural development Kwamena Ahwoi parliamentary affairs Joseph Owusu Acheampong trade & industry Ibrahim Adam transport & communications Edward Salia

Ministers (not of cabinet rank) roads & highways Ato Quarshie tourism Vida Amaadi Yeboah works & housing Kobina Fosu youth & sports Enoch Teye Mensah

Chairman of the Bank of Ghana Godfried K Agama

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 3

Economic structure

Latest available figures

Economic indicators 1991 1992 1993 1994 1995a GDP at market prices C bn 2,575 3,009 3,949 5,117a 8,253 Real GDP growth % 5.2 3.6 4.8 3.8 4.5 Consumer price inflation % 17.3 10.9 25.0 24.9 59.6b Population m 15.48 15.96 16.45 17.11 17.69 Exports fobc $ m 998 986 1,064 1,236 1,465d Imports fobc $ m 1,319 1,457 1,728 1,580 1,700d Current account $ m –251 –375 –558 –264 –182d Reserves excl gold $ m 550.2 319.9 409.7 661.0 697.5b Total external debt $ m 4,351 4,477 4,835 5,389 5,750 External debt-service ratio % 27.3 28.4 24.7 24.6 25.0 Cocoa productione ’000 tons 240 305 255 290 380 Gold production m fine oz 0.9 1.1 1.4 1.5 1.6 Exchange rate (av) C:$ 367.8 437.1 649.1 956.7 1,200.4b

August 9, 1996 C1,680:$1

Origins of gross domestic product 1993 % of total Components of gross domestic product 1993 % of total Agriculture, forestry & fishing 47.6 Private consumption 89.7 Mining & industry 16.0 Government consumption 11.7 Manufacturing 8.5 Gross domestic investment 14.8 Services 36.4 Change in stocks 0.1 GDP at factor cost 100.0 Exports of goods & services 19.6 Imports of goods & services –35.8 GDP at market prices 100.0

Principal exports 1994a $ m Principal imports 1990 $ m Gold 549 Capital goods 544 Cocoa beans & products 305 Intermediate goods 356 Timber 165 Fuel & energy 210 Consumer goods 124

Main destinations of exports 1994f % of total Main origins of imports 1994f % of total Germany 14 Nigeria 16 UK 12 UK 15 USA 12 Italy 8 Togo 8 Japan 6 a EIU estimates. b Actual. c Balance-of-payments basis. d Government estimate. e Crop years beginning in October of calendar years. f Based on partners’ trade returns; subject to a wide margin of error.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 4 Ghana

Outlook

Election preparations As preparations accelerate for the legislative and presidential elections on accelerate— December 7, the president, Jerry Rawlings, and the ruling National Democratic Congress (NDC) are maintaining the political initiative. They are weathering the internecine constituency battles and the resulting deselection of over 75 MPs, who have exposed party rifts by accusing the powerful first lady, Nana Konadu Rawlings, of hijacking the selection process. The president’s failure to be seen addressing corruption allegations against senior ministers has reduced his following, but not enough to outweigh institutional advantages which any challenger will be hard put to beat. A skilful election campaign has Mr Rawlings on (state) television every night, opening schools and clinics, digging feeder roads, dispensing roofing sheets, and campaigning for development. Having already used visits to the USA and Asia, and involvement in Liberia’s peace talks, to emphasise his international stature, he recently hosted a conference on foreign investment in Africa to broaden his appeal among Ghana’s business community—and foreign investors.

—and the opposition has The Nkrumahist alliance of the People’s Convention Party (PCP) and National not yet got its act together Convention Party (NCP) has made some organisational headway, as has the New Patriotic Party (NPP). Each has selected a candidate to challenge Mr Rawlings, and has chosen candidates to fight many constituencies. But they have yet to resolve the critical problem of deciding which candidate will run as the opposition single challenger to Mr Rawlings in the presidential elections. The Nkrumahists’ selection of the current vice-president, Kow Arkaah, could effectively torpedo plans to field a joint candidate. His position, and his constant criticism of the government, have raised his profile, but vulnerability to allegations of political opportunism and personal indiscretion make him an extremely risky candidate for the alliance. If the Nkrumahists push too hard for their man, the NPP—which has chosen the solid, reliable, family-oriented John Kuffour—may well decide that going it alone is a better option.

The campaign will be The coming months will bring a lively and unscrupulous government cam- unscrupulous— paign, stuffed with cheap political tricks, in an effort to discredit Mr Arkaah by leaking stories about his personal life and political inconsistencies. It will continue to place mischievous allegations in the government press, exaggerating differences in the opposition camp and playing off opposition parties and factions against each other. Less productively, it will try to smear the blemish- free Mr Kuffour, whom it has already accused of trying to raise a private militia. The opposition, members of which most of the independent press, will play similar games. Juvenile allegations, including reports in some papers of a military coup planned for December, will run alongside others alleging govern- mental foul play at every turn of the election process.

—with cooperation more Despite problems within the opposition alliance, there is scope for cooperation likely at party level in the legislative elections; the stakes are lower than in the presidential poll and many grass-roots members argue that collaboration is more likely to deliver results than in the presidential race. If they work together, the parties could capitalise on their regional strengths by fielding a single candidate in areas

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 5

where the NDC is known to be weak, such as parts of Western Region. The NDC will wield its own considerable skill at dividing the opposition, in a bid to prevent any such strategy. Even if the opposition manages to overcome differences over the leadership issue, it is still difficult to see how either of its possible candidates could defeat Mr Rawlings. Notwithstanding the real desire for change, and disillusionment with the president’s failure to control corruption, Mr Arkaah lacks credibility and Mr Kuffour lacks Mr Rawlings’ enjoyment in communing with the masses. If the opposition fails to agree on a single candidate, Mr Rawlings’ victory margin will be all the larger.

The fiscal and monetary With political pressures in the background, and little economic data yet avail- outlook is uncertain— able for 1996, the economic outlook remains highly uncertain. On the positive side, the month-on-month inflation rate slowed to 2.4% in May, the lowest rate for at least six months. While officials—who also cite an underlying decline in reserve money—were quick to declare this as evidence of the effective nature of their anti-inflation strategy, others are more sceptical. The government will only regain its fiscal and economic credibility if the dip in the inflation rate continues into July and August, when food prices are seasonally depressed by harvests. Much will depend on whether the government sticks with the rigid fiscal targets set by the IMF in June to correct overspending on roads earlier this year. That in turn will depend on how Mr Rawlings and the NDC perceive their chances as the elections draw nearer. Given such uncertain- ties, the EIU is raising its forecast of average annual consumer price inflation for 1996 to around 55% and also for 1997, to 30%. Our forecasts of 5% real GDP growth for both years remain unchanged, with industry (principally mining) making a strong showing.

—but external prospects Recent cocoa deliveries continue to support our previous crop forecasts of remain relatively healthy 380,000 tons in 1995/96. Given that the current crop was sold to take advantage of earlier price highs, we see no reason to alter our forecast that cocoa will yield around $490m in export revenue in 1996. While the gold-mining sector has yielded no reliable new data, a lack of bad news suggests that performance is matching earlier expectations of around 1.7m oz for 1996. Nonetheless, we are amending our earnings forecast slightly upwards, to $661m, to reflect the past month’s increase in prices on world markets to around $388/oz. This could be offset by lower electricity sales, given reduced output from Lake Volta. Assuming that timber and non-traditional exports continue to expand this year, by 13% and 15% respectively, to yield $215m and $115m, Ghana remains on target for total exports in 1996 of $1.6bn. With little new information to counter our earlier projections for imports ($1.83bn) and little change expected on services and transfers, we are maintaining our forecast of a current-account deficit of $110m in 1996, a figure which is expected to rise to $270m in 1997 as imports expand and world commodity prices decline. We have revised our view of the exchange rate; given current inflation levels, the real exchange rate is actually appreciating and we now feel that a less steep nominal decline to an average of roughly C1,625:$1 is more likely than our earlier projection of C1,800:$1. Further inflation-driven depreciation is likely to see the average exchange rate at roughly C2,000:$1 in 1997.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 6 Ghana

Forecast summary ($ m unless otherwise indicated) 1994a 1995b 1996c 1997c Real GDP growth (%) 3.8 4.5 5.0 5.0 Consumer price inflation (%) 24.9 59.6a 55.0 30.0 Merchandise exports fobd 1,236 1,465e 1,605 1,575 of which: cocoa 305 450 490 450 gold 549 589 661 660 Merchandise imports fobd 1,580 1,700e 1,830 2,000 Current-account balance –264 –182e –110 –270 Average exchange rate (C:$) 957 1,200a 1,625 2,000

a Actual. b EIU estimates. c EIU forecasts. d Balance-of-payments basis. e Government estimates.

Gross domestic product Cedi: real exchange rate (c) % real change, year on year 1990=100 6 110 Ghana C:£ Africa 5 100

4 90 3 C:DM 80 2 C:$

1 70

0 1993 94 95(a) 96(b) 97(b) 60

(a) EIU estimates. (b) EIU forecasts. (c) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World Economic Outlook. 1990 91 92 93 94 95 96(a) 97(a)

Review

The political scene

The government steps up Ghana’s National Electoral Commission (NEC) has set December 7 as the its election preparations— date for the presidential and legislative elections, which will be conducted at 20,000 polling stations around the country. In a bid to head off constant opposition allegations of foul play, the NEC has drip-fed the public with details of how the elections will be conducted. Voters will receive two ballot-papers, one for the presidential and the other for the legislative vote. Denmark is supplying 54,000 transparent ballot-boxes. Results will be declared at each station and collated at the NEC’s constituency headquarters before being relayed to Accra, and representatives of all political parties will be allowed to visit any of the electoral commission’s offices when results are declared.

—while the opposition In early July the NEC announced a fivefold increase in candidates’ deposits, to protests against an C500,000 ($300). Officials described the move as necessary to discourage frivo- increase in deposits— lous candidacies and to cover increased administrative costs. The opposition

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 7

complained bitterly, with the general secretary of the New Patriotic Party (NPP), Joseph Agyenim Boateng, lamenting: “To us, this is a very stiff levy, too strong for us.” Others later suggested that the move might be a deliberate attempt to cripple the opposition.

—supplementary The opposition had earlier challenged the NEC’s decision in May to reopen the registration— electoral register for supplementary registrations. The commission’s chairman, Kwadwo Afari Djan, said the NEC wanted to include those recently coming of voting age, and to give another chance to those unable to sign up during the main registration exercise last October. The NPP described the reopening as a ploy to increase the vote for the president, Jerry Rawlings, and the ruling National Democratic Congress (NDC). The NPP’s chairman, Issifu Ali, accused the government of plotting to add “ghost” names to an already “questionable” register. Both the NPP and the Nkrumahist People’s Convention Party (PCP) applied for a restraining order at Accra High Court, arguing that the move would violate Section 26 of the Public Elections Regulations, 1995.

—and missing ballot-boxes On July 1 an opposition newspaper, the Ghanaian Chronicle, alleged that a 40-ft container of ballot boxes had gone missing, having been diverted to an “unknown destination”. Mr Djan dismissed the report as baseless, saying that it had stemmed from an incident at Tema port, where one of eight containers arriving from Denmark had not been properly sealed. NEC officials went to inspect the container and resealed it. In a bid to counter any further suspicions, the chairman gave details on box transportation: Denmark is shipping boxes in batches and the NEC had reportedly taken delivery of 16,800 by early July. Two boxes will be supplied to each polling station, he said, releasing extensive details on how many would be allocated to each region.

Two parties are In late April two parties were disqualified from participating in the elections: disqualified— the Ghana Democratic Republican Party (GDRP) and the Democratic People’s Party (DPP). Speaking for the electoral commission, Mr Djan attributed the decision to the parties’ inactivity: they existed only in name, he said, and had not set up offices in the regional capitals.

—leaving six to fight it out This means that six parties will contest the elections, as follows.

• The NDC, which has governed since the 1992 elections. The NDC is the offspring of the old military-technocratic grouping, the Provisional National Defence Council (PNDC), which ruled between 1982 and 1992, and espouses a moderated version of donor-prescribed economic reforms.

• The Every Ghanaian Living Everywhere (EGLE) party, allied to the NDC, and which has no distinctive policies.

• The NPP, an Ashanti-based pro-free-market party in the tradition of politics incarnated by the late Kofi Busia; its members and supporters command most of Ghana’s private capital.

• The PCP, a left-leaning party which amalg-amates the first group of Nkrumahist parties formed in 1992. These claim the mantle of Ghana’s first prime minister and pan-Africanist politician, Kwame Nkrumah.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 8 Ghana

• The National Convention Party (NCP), another Nkrumaist group initially set up by the NDC to fragment the Nkrumahists ahead of the 1992 elections. It walked out of its alliance with the government in May 1995.

• The People’s National Convention (PNC), a Nkrumahist party based in northern Ghana, led by a former head of state, Hilla Limann. Mr Limann continues to resist alliance with the other Nkrumahists ahead of the 1996 elections, in which he feels he has a realistic chance of winning the presidency.

Nkrumahist parties name In mid-June Ghana’s vice-president, Kow Arkaah, was elected as the pres- their presidential idential candidate for the PCP-NCP alliance. He polled 952 votes to gain 62.7% candidate— of the total cast at the alliance’s congress in Kumasi. After two contestants stepped down, he defeated six others.

PCP-NCP election results, Jun 1996

No of votes Kow Arkaah 952 Alhaji Ibrahim Mahama 232 Kankam Da Costa 113 Y P Turkson 90 Professor George Hagan 78 F Akuffo 38 Ama Adumeah Ohene 15 Source: Ghanaian press.

Mr Arkaah, a member of the NCP, has declared himself in favour of the alliance with other opposition parties. His other (vague) policy objectives include fair prices for agricultural produce, and strong and humane government. He was Mr Rawlings’ vice-presidential running-mate in the 1992 elections after the NCP formally allied with the NDC. It proved an uncomfortable alliance, with Mr Arkaah openly challenging the unpopular value-added tax (VAT) intro- duced last year, and disagreeing with Mr Rawlings on other issues. Tensions culminated in a reported physical altercation, which raised prospects of a con- stitutional crisis earlier this year (1st quarter 1996, page 10).

—in a controversial choice As vice-president, Mr Arkaah has one of the best-known faces in Ghana, which is a good electoral asset for the Nkrumahists. This, and his criticism of the introduction of VAT—which brought plaudits from workers demonstrating at the 1995 May Day rally—probably explains why delegates chose him over the other candidates. They also appeared keen to tap into public sympathy arising from his oft-recounted, and politically exploited, experience of allegedly being “manhandled” by the president. However, his political rivals could easily turn such assets into liabilities. Some have already accused him of seizing the NCP leadership through dubious means in 1992, and of selling out the Nkrumahists to the government shortly afterwards. Others say he lacks political integrity because he did not resign the vice-presidency when openly disagreeing with government.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 9

Mr Arkaah’s party His Nkrumahist enemies went on the attack during the congress and one of enemies have ammunition them, Daniel Offei, openly criticised him, saying that it was morally and polit- against him— ically indefensible for Mr Arkaah to seek to unseat the government as a presidential candidate while he remained vice-president. While still in office, Mr Arkaah could not expect the support of Mr Offei and his colleagues. This stand was reinforced by the chairman of Sunyani East constituency in the west, who said the situation made a mockery of Ghana’s emerging democracy.

—while others exploit an Days after his election, Mr Arkaah’s enemies were raking up an old scandal to old scandal— cast aspersions on his character: the Ghanaian Democrat republished an old front-page story in the opposition Free Press dated August 19, 1994, alleging that he had seduced a sixth-form schoolgirl. Mr Arkaah denied the report, claiming that the government had planted it. He pursued this line further, claiming that the alleged victim’s uncle was promoted to deputy minister in his government department as a “reward” for cooperating in framing him. The government denied this allegation, saying that the promotion was made two months before the offending article was published.

—and his appointment Mr Arkaah’s selection could easily imperil the NCP’s already foundering talks could weaken the alliance with the NPP over nominating a joint candidate to challenge Mr Rawlings in the presidential elections on behalf of all three major opposition parties, and may also damage plans to collaborate in the legislative elections. It is likely to increase the reservations of those NPP members who have been lukewarm towards the PCP-NCP marriage of convenience. Indeed, some reports say that the influential but defeated NPP presidential candidate, Albert Adu Boahen, who was recently talked into backing the alliance, has withdrawn his support. Publicly, both the NPP and the PCP-NCP say they are happy to let the other have the presidential candidate. Privately, however, negotiations are in limbo because neither is willing to cede the candidacy to the other. Since electing its new leader, John Kuffour, the NPP has recovered some of the cohesion it lost last year. It now appears more self-confident and less committed to alliance than the Nkrumahists, and could easily choose to go it alone if Mr Kuffour is not chosen as the joint candidate. In early July, the NPP’s former chairman, J B da Rocha, spoke out, saying that Mr Arkaah had become a controversial figure, “and in my view a liability to us. We should not tie the fortunes of our party to him.”

Suspicion remains The administration has been ruthlessly exploiting unease over the opposition between the partners alliance, publishing stories almost daily in the government press which are likely to fuel suspicion between the PCP and the NCP, including a report in mid-June that Mr Arkaah had accepted the vice-presidential nomination for December’s poll as Mr Rawlings’ colleague. This device appears to have had some success: in mid-June a private pro-Nkrumahist weekly, the Independent, reported that the NPP had already decided that Mr Kuffour would run against Mr Rawlings, even before the electoral college had reached a decision. The NPP had, it stated, spent C100m ($60,000) on billboards advertising Mr Kuffour as the NPP’s presidential candidate—enough indication, it said, that the NPP already knew who the presidential challenger to Mr Rawlings should be.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 10 Ghana

Mr Kuffour is a dream The NPP candidate, Mr Kuffour, is a low-risk choice, in marked contrast to candidate— Mr Arkaah. He has relevant experience, having served as a member of parliament when he was 30 and as deputy foreign affairs minister at 31. He also has a background in local government, having served as city manager and chief legal officer of Kumasi city council. When he was a high-ranking PNDC member in the 1980s, he drew up local government guidelines which form the basis for the current decentralisation policy. The Independent described him as “the dream president” with only one small blemish—his earlier association with the PNDC.

—but lacks charisma Mr Kuffour is a quiet business lawyer and family man. His main disadvantage, according to the London-based newsletter Africa Confidential, is that he lacks tshoo boi, an instant affinity with the crowds, which Mr Rawlings has in abun- dance. For Africa Confidential, Mr Kuffour offers a gentlemanly, conciliatory and rational manner which contrasts with the harsh bandwagon politics of the NDC. Several NPP loyalists have reportedly urged him to adopt a tougher campaigning manner. Such descriptions invite parallels with the current electoral situation in the USA. Mr Kuffour’s reticence with crowds is not dissimilar to that of the current Republican candidate, Bob Dole, whereas Mr Rawlings’ enjoyment of pressing the flesh can be likened to that of the president, Bill Clinton. Such views were confirmed by reports on Mr Kuffour’s profile-raising trip to the USA and the UK in early June, to meet diplomats and Ghanaian expatriates. The verdict was “sound but unexciting”.

The NDC also faces As expected, primary elections for NDC candidates in June turned constituency difficult rifts— politics into a battlefield. Local party members complained of excessive inter- ference from the centre and 75 MPs were deselected. The process has left deep wounds in the constituency parties, and many of the deselected MPs are threat- ening to make trouble: some are flirting with the opposition parties, while others are demanding financial compensation. In a move to soothe some of the local resentment, the party’s vice-chairman, Harry Sawyer, pledged that the NDC would not change the results of constituency primaries if they represent the voice of the people on the ground.

—as ousted MPs blame the Ousted MPs and their supporters say the deselections were engineered by the first lady— first lady, Nana Konadu Rawlings. They have accused her of packing constituencies with loyalists from the 31 December Women’s Movement (DWM), a powerful organisation set up by Mrs Rawlings in the 1980s. Informed sources say Mrs Rawlings had a strong hand in the events, but that the ousted politi- cians were poor constituency MPs and would probably have lost their seats anyway. Presidential wives have long been convenient targets for political recrimination in Africa, as elsewhere.

—bringing factionalism These and other developments have spawned reports that several factions are to light emerging in the NDC. Africa Confidential identifies a “First Lady Faction”, reportedly dominated by Mrs Rawlings and the youth and sports minister, Enoch Teye Mensah, linked to the Association of Committees for the Defence of the Revolution. Another faction is led by the foreign affairs and justice minister, Obed Asamoah, a key NDC campaign strategist who defers only to the president, and when necessary, Mrs Rawlings as the newsletter puts it. A third

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 11

grouping, led by the local government minister, Kwamena Ahwoi, has strong roots in Western Region and works closely with NDC local government execu- tives across the country. Another, dubbed the Fante Confederation (after the ethnic grouping which predominates in coastal Ghana), includes the information minister, Kofi Totobi Quakyi. The last, says Africa Confidential, is the Northern Faction, led by the defence minister, Mahama Iddrisu, and includes: the NDC national co-chairman, Issifu Ali; the trade minister, Ibrahim Adam; and the high-profile deputy foreign minister, Mohammed Ibn Chambas, who has been identified as a possible running-mate for Mr Rawlings.

Four are named as The government-backed Horizon newspaper has named Mr Iddrisu as one of potential running-mates— the president’s potential running-mates in the forthcoming elections. The main advantage to his candidature would be his strong northern support base, which Mr Rawlings would need to win. Other contenders include the long- standing de facto prime minister, P V Obeng, and the vice-chancellor of the University of Ghana, George Benneh. Mr Obeng is being discounted by many commentators because he has been investigated for alleged corruption by the Commission on Human Rights and Justice, which, it is felt, would provide too much political ammunition for the opposition in an election campaign.

—as inter-party deals In early July the EGLE party underlined its cooperation strategy with the govern- continue ment by announcing it would contest 12 of 19 constituencies in Western Region, leaving the other seven for the NDC. The EGLE held primaries throughout June and July.

The economy

Inflation slows in May— In the first encouraging sign for many months, the government’s statistical service has reported a significant improvement in headline inflation in May. Growth in the combined consumer price index slowed to 2.4%, compared with 3.5% and 3.9% in April and March respectively. This was the lowest growth rate since October, when an expansion in money supply, inflated by purchases of a larger than expected cocoa crop and overspending on roads, derailed last year’s inflation strategy.

The main improvement was in the food price index (fpi), where monthly growth has gradually declined. In February the fpi grew by 4%, since when its rate of increase has fallen steadily to 2.1%, 1.8% and 1.4% in March, April and May respectively. The rate of increase in the non-food index has reduced more slowly to 2.9%; even so, this is less than half the May 1995 growth of 5.9%. The May figures brought year-on-year inflation down to an improving but still unacceptable 54.2%.

—but this is not yet It is too early to say whether the May figures represent a one-off, or the begin- a trend ning of a trend, especially since some economists report a slight increase in money supply in the first quarter. On the other hand, in July the central bank told the London-based daily Financial Times that what it refers to as “reserve money”, the benchmark used to target money supply, contracted by some 6% in the first four months of 1996. For all the improvement in May, the situation

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 12 Ghana

remains precarious, and highly vulnerable to election-inspired spending later in the year.

The long-term prognosis is While Ghana’s current macroeconomic policy thrust is appropriate, it is un- viewed with gloom likely to bring accelerated growth and significant poverty reduction over the longer term, as a free-market economist, Tony Hawkins, argued in an influential commentary on Ghana’s economy in the Financial Times in July. The feature, dramatically entitled “Back in the intensive care ward”, a reference to runaway inflation and the government’s failure to meet IMF targets in 1995, argued that if the government meets its 1996 budget targets, Ghana could regain some of its former prestige as an African structural adjustment success story. But the goals are tough, particularly for an election year, Mr Hawkins warned, and analysts differ over whether the political will and institutional capacity to achieve them exists. He noted on the positive side that the government appears to be making a genuine attempt to control money supply.

Low infrastructure Although arguing that the current thrust of policy prescriptions was appropri- spending constrains ate for the short term, Mr Hawkins raised doubts over their longer-term via- investment bility. Low public investment in infrastructure—capital spending is expected to fall to 3.9% of GDP from last year’s 6%—is constraining private-sector investment. With investment set to decline as a proportion of GDP this year to below 18%, output growth is unlikely to exceed 4.5%, far short of the 8% growth target set out in the government’s “Vision 2020” programme, which sets out long-term goals for society and the economy. Given current poverty levels and Ghana’s low domestic savings rate—below 10% of GDP—foreign investment appears the only likely force for sustained recovery. However, this is unlikely to flow into non-mining sectors because of run-down infrastructure and Ghana’s small domestic market. Even the IMF’s generally optimistic forecasts point to modest flows of $40m annually in the next three years, which, Mr Hawkins argued, support his prognosis of 4.5% annual growth. (The EIU is slightly more optimistic, forecasting annual real GDP growth of 5% in 1996-97.)

Plans to become a Ghana’s efforts to attract investment geared to exporting into neighbouring regional export base are West African states and elsewhere, through attractive incentives and free-trade flawed zones, appear set to be undermined by continuing difficulties at borders and relatively high Ghanaian wage costs. The minimum wage is just over $1 per day, and while this is likely to fall with continuing depreciation of the cedi, it is difficult to see Ghana becoming globally competitive in the medium term other than in mining and agriculture. Mr Hawkins even looked at the dark side of the recent upturn in Ghana’s external accounts, noting that unsustainable and unreliable factors—weak import demand and high export prices—have been key contributors to healthy-looking trade balances.

“Surely there is more to Mr Hawkins’s survey concluded on a pessimistic note, with criticism directed at successful adjustment the multilateral architects of Ghana’s policies, about whom the author is a than this?” well-known sceptic. Real incomes per head have risen by 8% since 1990, he noted, and Ghana is performing better than most sub-Saharan economies. However, as Ghanaians themselves are the first to point out, that does not mean very much, given the disastrously low point from which the adjustment

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 13

experiment started. In the absence of Asian-style foreign investment inflows, the economy will continue to expand at 4-5% annually, while the gap in living standards between Ghana and the world’s dynamic economies will continue to widen. Mr Hawkins concluded bleakly: “Surely, there is more to ‘successful’ adjustment than this?”

Investment figures The government’s divestment body, the Divestiture Implementation Committee conflict again— (DIC), says the government had authorised 159 divestments by the end of 1995, accounting for just under half of the 347 state enterprises operating in the mid-1980s. Some 72 were earmarked for outright sale, while shares were sold in a further 28, another 14 became joint ventures, five were leased and 42 were liquidated. As the table below shows, the bulk of liquidations occurred in the years to 1991.

Government divestments

1991 1992 1993 1994 1995 Total Sale of assets 16 4 3 30 19 72 Sale of shares 11 5 2 2 8 28 Joint ventures 6 3 1 4 0 14 Lease 310105 Liquidation 24 2 5 5 6 42 Total 60 15 11 42 33 159a

a Total in sources. Components add to 161.

Source: Divestiture Implementation Committee.

However, the Financial Times reported that some 79 sales had been completed by the end of 1995, 31 had been taken over by private owners and partly paid for, and 85 were still awaiting final purchase agreements. However, its total—of 195 enterprises at various stages of divestment—appears to conflict with the DIC figures, suggesting that more enterprises are being processed than the DIC has approvals for. Information on Ghana’s divestment programme has always been patchy and contradictory, and this remains the case, even at this relatively advanced stage of the divestment process.

—but the start-up rate The Ghana Investment Promotion Centre (GIPC) has reported an 80% imple- seems good by regional mentation rate on registered projects visited by it, news which should enhance standards— Ghana’s attraction to potential investors once election uncertainty is out of the way. Since the GIPC was reformed in 1994, it has registered 205 new projects outside the mining sector.

Although most African governments cite registrations as an indicator of investment performance, the implementation rate is a far more useful sign. In many countries, a large percentage of new companies remain mere statistics on a register, without capital and strangled by government bureaucracy. In contrast, the implementation rate indicates investor commitment to putting money into a project, and government encouragement of new businesses. According to the Financial Times survey, Ghana’s reported implementation rate is high by regional standards, and some 30% higher than Zimbabwe’s. The results also appear to vindicate the government’s transformation of the GIPC from an

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 14 Ghana

approval agency—a role it performed badly—into a purely promotional and monitoring body.

—and services are the Judging by the data on projects approved, services appear to be the most most attractive sector attractive sector for potential investors, accounting for 61 projects, worth $75.7m. However, manufacturing has attracted the largest amount of capital, at $89.9m. Agriculture, the most important sector for jobs and economic performance, came a poor fourth. The total value of investments was $225m. Around $76m represents new foreign equity, and nearly 50% foreign loan capital. Local joint-venture partners account for the balance of $36m.

Investment registrationsa, Sep 1994-Mar 1996

Sector No Value ($ m) % of total value Manufacturing 55 89.9 39.9 Services 61 75.7 33.6 Construction 22 28.4 12.6 Agriculture 20 23.8 10.6 Others 47 7.3 3.3 Total 205 225.1 100.0

a Outside mining sector.

Source: Ghana Investment Promotion Centre.

The government prepares Ghana’s transport and communications ministry has appointed Ecobank to sell Ghana Telecom— Ghana and the US arm of Crédit Suisse First Boston as financial advisers on the sale of the telecommunications utility, Ghana Telecom, which is likely to go on the market after the presidential and legislative elections in December. The banks’ main task will be to find a core foreign strategic investor to take a 30% stake in the company, which is committed to bringing in new management and technology. The ministry also plans to offer shares locally, and a further tranche for institutional investors. The accountants, Coopers and Lybrand, are assisting with pre-sale financial restructuring, preparing and auditing the opening balance sheet, and advising on a suitable capital structure for the planned sale.

—as understanding of The ministry has also produced a carefully written booklet explaining the privatisation grows rationale for privatising Ghana Telecom, arguing that the firm provides a generally poor service, but cannot fund improvements itself. The booklet sets out the disadvantages of aid-backed finance (long gestation periods for multilateral credits and high procurement costs under bilateral tied-aid deals), thus present- ing a strong case for private investment. Such pamphlets and other data, now published on every enterprise designated for a listing on the Ghana Stock Exchange (GSE), show how stock exchange listing requirements have increased transparency in Ghana’s privatisation process. This is in turn enhancing local understanding and investor interest in privatisation, and providing a counter- weight to the negative images of rising unemployment that accompanied the first wave of divestments. Five years ago, when the ill-equipped and under- staffed DIC controlled most of the privatisations, questions from the public were not encouraged. This partly reflected the very different nature of the transactions, most of which were private deals. But it also reflected concern about political considerations and high-level scepticism about privatisation.

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 Ghana 15

Agriculture

Bullish cocoa forecasts Forecasts of a strong mid-season cocoa crop have proved correct but analysts and appear vindicated— also Ghanaian officials continue to differ over the probable total for the 1995/96 harvest. In May the world industry body, the International Cocoa Organisation (ICCO), revised its earlier projections upwards by 45,000 tons to 375,000 tons, just ahead of the 365,000 tons anticipated in the same month by the London- based trading house E D & F Man. Meanwhile, Ghana Cocoa Board (Cocobod) appears to be sticking with its more optimistic forecast of 400,000 tons. Whoever proves to be right, it will still be the best season since the mid-1970s.

—as the early outlook for Although it is still too soon for an accurate forecast of next year’s crop, initial 1996/97 is good— signs suggest that Ghana could be in for another good main season. According to the EIU’s World Commodity Forecasts, heavier rains have boosted moisture levels to the benefit of the 1996/97 main crop. Caution is still the rule, however; we are assuming a good crop by normal trends, at around 325,000 tons, rather than the exceptional results of the current season.

—but forward prices are Prices took a tumble on June 17, with the September 1996 contract closing £20 difficult to gauge per ton down at £1,119/ton on the London Commodities Exchange (LCE). By July 25 the same contract was trading at only £997/ton. It is not clear whether the fall was inspired by awareness of better global supplies, which caused ICCO to change its forecast position for the end of 1996 from a deficit of 80,000 tons to a surplus of 10,000 tons, or by technical factors in the futures market.

Prospects of good earnings The downturn is unlikely to affect earnings in 1996, since the current crop has in 1997 appear already reportedly been sold. Looking to next year, healthy contango (a pre- reasonable— mium on forward-sold crops) in futures market prices suggests still reasonable earnings for 1997, assuming some selling is already taking place. In late July the average futures price for delivery in July 1997 was £1,016/ton ($1,537/ton). If multiplied by 325,000 tons, the expected size of Ghana’s 1996/97 crop, this would yield around $500m—slightly on the high side, given that even this year’s record crop is set to earn less than $500m. Using the forecast average for 1997 cited in World Commodity Forecasts, of 64.2 cents/lb ($1,357/ton), earnings would be a more realistic $457m. This is reflected in our forecast summary, which rounds the figure down to $450m.

—and producer prices are In early June the government announced its by now traditional upward adjust- raised as usual— ment in producer prices, raising the rate by 43% to C1.2m/ton ($715/ton). The increase, giving a price equivalent to C75,000/bag, was recommended by the producer price committee, which comprises farmers, Cocobod, the government, private buyers and transporters. The price—a base indicator which private buying companies can improve upon—is based on forward inflation assumptions and gives farmers about 51% of the world market price.

—but liberalisation The stance of the World Bank and the IMF on the liberalisation of external pressures raise quality cocoa marketing has come under more fire in recent months, and the govern- issues— ment, armed with fresh ammunition from independent consultants, appears to be digging in its heels against further reforms. Following the liberalisation of

EIU Country Report 3rd quarter 1996 © The Economist Intelligence Unit Limited 1996 16 Ghana

internal marketing in 1992, 12 buying companies now compete with Cocobod, and between them purchase roughly 25% of the crop. The reforms have en- hanced incentives to farmers, with competition bidding prices over the basic producer rate, and are thought likely to increase output over the longer term. However, they have also given rise to problems of quality. Competition has encouraged farmers to sell quickly, often under pressure, and beans have often been transported before they have been properly fermented. Some output is also stored in substandard warehouses. Security risks associated with the move of some buyers away from cheques into cash have also encouraged farmers to transport cocoa prematurely.

Only a small proportion of the crop has so far been affected, and that has been caught by Cocobod’s checking system before export. Officials argue that buyers are still adapting to new circumstances and are likely to refrain from such practices, or lose their licences in future. However, if as the reforms prescribe Cocobod loses its export monopoly, it will be unable to enforce quality control as it does now. As a result, Ghana’s cocoa, which commands a premium over other crops due to its high quality, could go the way of beans from Nigeria, Cameroon and Benin, whose quality declined after liberalisation.

—as the World Bank When the World Bank and Cocobod were unable to agree on how to deal with dismisses a report it this issue, the Bank appointed an independent UK-based consultant to con- commissioned— sider the issues. The latter concluded that Cocobod should maintain its existing export monopoly, but the World Bank rejected its findings, much to the annoyance of Cocobod officials. In the opinion of K Adjei Maafo, the head of Ghana’s Cocoa Policy Unit, “If you pay for a job to be done and then say you won’t accept it because it doesn’t go in your direction, it’s not fair.” Mr Maafo has argued forcefully that the World Bank should give Cocobod a breathing space to resolve problems arising from existing domestic liberalisation meas- ures before it tackles external marketing.

—and Cocobod sticks to In early July Cocobod’s head of policy planning and research, James Amoah, its guns sent a further unambiguous message to the Bank, arguing that Ghana would not be rushed into reforms. Pressure from donors to streamline the cocoa sector and cut back up-country quality checks would create false economies, Mr Amoah argued, pointing out that if quality were to decline because of cuts in quality checks, Ghana would lose the premium its cocoa currently commands on world markets. For Mr Amoah this premium more than compensates for quality-control operating costs, as well as potential government tax revenue and farmer income lost when bad beans are not marketed.

Cocobod has proved adept at mobilising support for its case with appealing arguments. Having cut staff from 90,000 in the mid-1980s to 10,000 today, and having liberalised internal marketing, it has portrayed itself as a willing reformer, but one which is nonetheless unprepared to compromise on the fundamental issue of quality. Donors, for their part, argue that Cocobod’s current monopoly still stifles competition and keeps internal buyers’ margins low. Their proposals, they say, would also increase producer prices, and thus stimulate production.

Ghana processes more Ghana’s cocoa grindings rose by 85% to 67,000 tons in 1994/95 and appeared cocoa at home— set to rise to 70,000 tons in the current season, according to the latest ICCO report. The change appears to reflect greater foreign investment in domestic processing, though there is little information on how local beans are being used. Exports of cocoa butter declined to 3,900 tons in 1994/95 (from 5,900 tons in 1993/94), while exports of cocoa paste/liquor rose marginally from 7,675 tons to 7,704 tons. The Bank of Ghana (BoG, the central bank) estimates that cocoa-product export earnings stood at $28.3m in 1995, while an independent Accra-based think-tank, the Centre for Policy Analysis (CEPA), reports them at $31.2m for the year.

—and sells more One factor which could account for this small discrepancy is differing defin- by-products abroad itions of cocoa products, and the range of uses to which cocoa by-products are put. Such sales are reported under differing definitions of non-traditional exports (see Foreign trade, aid and payments). According to a recent sponsored survey in the US-based Fortune magazine, cocoa husk is used for fertiliser. A UK-based company, Sunshine of Africa, has been importing cocoa husk as an ingredient for weedkillers and slug repellents.

Japanese aid boosts crop Japan has approved a $4m loan for a project to construct 21 bridges between transportation cocoa-growing areas and Ghana’s ports, to facilitate the inland freighting of cocoa. The bridges, dotted all over southern Ghana, will also help small producers transport their goods to market. Construction is due to start before the end of the year, with completion set for some time in 1997.

Mining

AGC profits are down Ghana’s largest mining company, Ashanti Goldfields Corporation (AGC), by 3%— reported a 3% decline in net profits to $46.5m for the first half of the current fiscal year, which ends in September. AGC blames the fall on higher costs, which it said could have driven profits even lower were it not for the company’s risk management programme, which locked in healthy prices. AGC’s mines, which began including production figures from foreign acquisitions in the first quarter in its statements, produced 490,139 oz of gold over the period.

—on higher costs— Cash-denominated operating costs rose by 13% on the 1994/95 full-year figure, to average $234/oz. Total costs rose by 13% to $256/oz. Surface operations suffered the highest increase, where cash operating costs rose by 15% to $258/oz. Analysts attribute this to a move into harder refractory sulphide ores from the lower-cost oxide zone mined before. Problems were compounded by unanticipated ore problems and higher cyanide costs. Increased outlays on underground mining are attributed to a 22% reduction in grade. More posi- tively, AGC managed to raise revenue by 17% to $224.4m through a skilful hedging programme, which locked in an average gold price $54 above the spot-market average over the period.

—as the company After a hectic few months to April, AGC continued its expansion drive with a continues its expansion deal to acquire Ghana Libyan Arab Mining Company (Glamco). The acquis- drive ition, in return for 1.56 million shares in AGC, carries a further 45% interest in

Glamco’s Bibiani project, building AGC’s stake in the project to 90%. (AGC’s acquisition of IGR, launched in early April, brought it the first 45% stake (2nd quarter 1996, page 15.) AGC has for some time been after the long- undercapitalised Bibiani mine, and plans to use plant and equipment from its own Obuasi mine to advance the project, starting production at the end of 1998. Current plans envisage an annual production rate of 150,000 tons of ore, with a cash operating cost of $200/oz.

Looking abroad, AGC has also signed an option deal with the Vancouver-based Carlin Resources for an interest in Niger’s Tera gold concession. According to the London-based monthly International Gold Mining Newsletter, AGC has agreed to pay Carlin $100,000, spend $2m on exploration work and produce a feasibility study before the end of 1998. This gives it the right to acquire a 51% interest in Carlin’s 90% stake. It is already drilling in Niger’s Saoura concession, with its partner Iamgold (also Canadian), and the partnership plans to spend $7.6m in 1996 on a number of projects that could further swell AGC’s reserves. These include drilling at Bambadji in Senegal, on which AGC has a 50% option, and the Mandiana concessions in eastern Guinea.

More Canadian and Meanwhile, the Montreal-based Birim Goldfields and Australia’s Esmeralda Australian investors Exploration have acquired an old mine in the Ashanti region, according to the move in— Paris-based newsletter Africa Energy and Mining. The Akrokeri mine produced 75,000 oz of gold from 104,000 tons of ore in 1905-09, during British colonial rule. The concession’s ore zone extends more than 550 metres and consists of a two-metre wide mineralised quartz vein, the report says.

After some delays, development of the Obotan mine near Ebiram has moved on to the fast track following a merger between Australia’s Associated Goldfields and Samantha Resolute. According to reports in the fortnightly London-based Metal Bulletin, the merger (and finance arranged through the Rothschilds mer- chant bank) paves the way for a planned opencast mine producing 85,000 tons per year over eight years, using conventional processing technology. Associated Goldfields completed a feasibility study on the project in 1995.

—as others move on Australia’s Takoradi Gold has started drilling its Kutukrom concession on the Axim Konongo belt. It is upbeat about prospects because the mine adjoins Prestea and lies close to other large producers, including Teberebie and Iduapriem. Meanwhile, Cambrian Resources has reported visible gold in quartz veins and found samples of up to 11.2 grams per ton (g/t) at Akokoaso. Ghana Gold Mines (GGM) has found promising intersections at the Kyereben prospect on its Konongo concessions. Drilling has turned up several mineralised zones of up to 120 metres in strike and 10 metres in width, according to the specialist press, and GGM has applied for licences to explore the Anum, Pemenase and Praso concessions to add 50 sq km to its concession area.

Another Australian company, Ranger Minerals, is raising finance to develop the Damang gold deposit, north of Tarkwa. A feasibility study estimates that Ranger will need at least $95m to produce 270,000 oz per year, processing 3m tons of ore. In fresh drilling the company found 3.31 g/t at over 48.6 metres depth and 3.97g/t at over 72.5 metres.

Infrastructure and health

Health-sector reform is The World Bank is preparing a new loan of around $50m to support the govern- planned— ment’s Medium-Term Health Strategy (MTHS). Known as a Sector Investment Programme (SIP) and due for approval next year, this is a new-style lending instrument under which each donor will finance a slice of a wider sector reform programme, coordinated by the government. The SIP approach aims to rectify earlier problems, including poor management and poorly coordinated aid programmes—the fault both of donors, who had their own agendas, and of the government.

The quality of care provided by Ghana’s health service is poor, despite reforms, much donor money and the introduction of user fees. Only 40% of the population have access to basic health services; drug shortages are common; medical equipment does not work; staff morale is low; and the newspapers carry fre- quent reports of doctors and nurses demanding additional money before treating patients. Although the government allocates 10% of its budget to the health sector, resources have been unproductively used: it has been tardy in allocating funds to regional and district health authorities, emphasising salaries at the expense of equipment and drugs, and hospitals at the expense of cheaper and more productive primary care. The MTHS aims to provide more people with healthcare and improve the quality of services, by improving management and investing more in primary healthcare facilities.

—and telecoms In June the Ministry of Transport and Communications said it would license a liberalisation proposals second national network operator to compete with Ghana Telecom, which is are unveiled being transformed into a limited-liability company as part of the planned deregulation of the telecommunications sector (see The economy). It will also deregulate mobile cellular telephone services, data transmission, and paging and payphone services, and will allow large corporate users their own private net- works. The sector will be regulated by a new body, the National Communications Authority. A consultant has already submitted draft proposals for licensing terms for telecom services operators, and a new framework for tariff policies.

The ministry’s current two-year programme, ending in December 1996, aims to raise national telephone availability to 200,000 lines, or 13 telephones per 1,000 people. This is the maximum it can provide with its own capital and aid finance, but remains well short of demand, estimated at 300,000 lines, which should be met after privatisation. Although the infrastructure has improved significantly since 1994—Ghana Telecom doubled the lines available to 98,600 by the end of 1995, with World Bank finance—services remain extremely poor. Only 37 of Ghana’s 110 administrative districts have telephone exchanges. The north has only three telephones per 5,000 people, while national ratios appear to vary between three and five per 1,000. Moreover, there are only 537 payphones throughout the country, of which half are in Accra. Services are equally poor: the completion rate for all calls is low, and the average fault repair delay is around seven days.

Foreign trade, aid and payments

The debt burden increased Ghana’s external debt increased marginally in the final quarter of 1995 to in late 1995— $5.07bn, according to the Bank of Ghana (BoG, the central bank), in its year- end Quarterly Bulletin of Statistics for 1995. Changes included a more than doubling of short-term debt to $270m—reflecting seasonal borrowings to fund purchases of the cocoa crop—and a decrease in medium-term debt to $976m from fractionally under $1.2bn in September. The latter reflects amortisations, including $60m paid to the IMF. This was offset on the long-term accounts, with multilateral disbursements recovering to $2.8bn after being static for much of the year.

The BoG’s longer-term figures suggest that debt increased by only $52m over the end-1994 figure. (The World Bank estimated total external debt at the end of 1994 at $5.38bn; 2nd quarter 1996, page 18.) This implies that short-term debt levels are little different from levels seen at the end of 1994, and that the government amortised a good deal of its medium-term obligations during 1995. While overall bilateral debt picked up by 10% in June, ending the year $100m up, the main increase occurred on long-term obligations, which rose by just under $200m over the year. It is not clear whether this reflects a recovery in World Bank disbursements, which have been stalled in recent years by Ghana’s failure to comply with loan conditions.

External debt ($ m) Dec Sep Dec 1994 1995 1995 Short-term debt 267 120 270 Medium-term debt 1,212 1,198 976 of which: IMF 700 709 648 Long-term debt 3,541 3,653 3,827 Total debt 5,022a 4,971 5,074

a Does not sum in original.

Source: Bank of Ghana, Quarterly Bulletin of Statistics.

—while the net position Although Ghana’s position with foreign banks reflects both state and private with reporting banks assets and liabilities, the central bank’s information on public and publicly deteriorated guaranteed debt flows sheds some light on a dramatic decline in Ghana’s net position with reporting banks during the final quarter of 1995. This more than halved to $160m, the weakest since 1990.

International bank assets and liabilities ($ m) Dec Dec Sep Dec 1993 1994 1995 1995 Assets 1,004 1,053 1,203 1,042 Liabilities –586 –681 –712 –882 Net position 418 372 491 160 Source: Bank for International Settlements, International Banking and Financial Market Developments.

While cocoa borrowings appear to account for the increase in liabilities, the decrease in assets could reflect the amortisations recorded above. The drop in assets should not ring alarm bells because it reflects a return to trend after moving to unusually high levels in September. The liabilities position could be sustained, even after cocoa loans are repaid, given recent borrowings by the mining company Ashanti Goldfields Corporation (AGC) to finance its acquisition drive.

CEPA sheds light on An independent think-tank, the Centre for Policy Analysis (CEPA), has pro- smaller exports— duced the most comprehensive breakdown of data from the export sector since the last data from the government’s Central Statistical Office was published in June 1994, and sheds light on trends in lesser-known export goods. The CEPA figures show: a large drop in electricity sales, to $55m in 1995, which probably reflects both last year’s low water levels in Lake Volta and higher domestic demand; a 25% decline in diamond earnings in 1995; and a declining trend for manganese exports.

Merchandise exportsa ($ m)

1991 1992 1993 1994 1995b Cocoa 346.5 302.5 285.9 320.2 432.7 Beans 313.5 276.8 250.5 295.0 401.6 Products 33.1 25.7 35.4 25.2 31.2 Coffee 0.4 0.9 1.0 1.2 1.2 Shea nuts 0.2 0.7 1.0 0.8 0.8 Gold 304.4 343.4 434.0 548.6 637.2 Diamonds 19.2 19.3 17.3 20.4 15.3 Manganese 20.2 16.5 13.9 9.6 6.4 Bauxite 8.6 9.5 8.4 9.6 9.7 Timber & products 124.2 113.9 147.4 165.4 190.6 Residual oil 19.7 19.2 14.2 17.7 16.0 Electricity 96.0 95.6 69.1 56.4 55.0 Non-traditional 58.1 64.9 71.7 86.6 100.0 Total 997.7 986.3 1,063.6 1,236.4 1,464.7

a May not sum due to rounding. Balance-of-payments basis. b Government estimates.

Source: Centre for Policy Analysis, Macroeconomic Review and Outlook.

—as non-traditional Meanwhile, the BoG has provided a breakdown of non-traditional exports in exports blossom its end-year quarterly bulletin for 1995. Although limited to the first three quarters of the year, the information is useful given that there is little comprehensive, or consistent, data on the sector.

In line with its mandate, the BoG merely reports the figures, with no reference to underlying trends. The data show processed and semi-processed goods— which include pineapple juice, aluminium sheets, furniture parts and wood- work products—leading the way in export share and growth, followed by agricultural products, including pineapples, bananas, yams and cocoyams. Handicrafts made a disappointing showing. The BoG says the EU is the leading destination for non-traditional exports, accounting for 57% of the total. West

Africa is the second most important destination and its importance is growing: its share increased from 16% in 1994 to almost 20% last year.

Non-traditional exports ($ m) Jan-Sep 1994 1995 Agricultural exports 31.5 21.2 Processed & semi-processed products 48.4 76.7 Handicrafts 1.8 1.5 Total 81.7 99.4 Source: Bank of Ghana, Quarterly Bulletin of Statistics.

Switzerland takes most of Switzerland was the leading merchandise importer from Ghana in January- the gold— March 1996, taking $125m worth of products, according to a new quarterly publication, Ghana Export Bulletin, published by the trade and industry ministry and citing local customs data. Most of the Swiss consignments were gold, en route for finishing. The UK followed with $110m, mainly in cocoa and gold, and the Netherlands was in third place with just over $20m in cocoa and unwrought aluminium.

—as tourism earnings rise While Ghana’s tourism ministry has grand ambitions, with targets including 400,000 visitors by 2000 and earnings of $1.25bn in 2010, a recent study by the World Tourism Organisation and the UN Development Programme argues that much more work needs to be done to build a tourist infrastructure attractive to visitors. It laments the poor quality of hotels in the coastal region—the home of major potential tourist attractions, including Elmina and Cape Coast castles. It also says that the requirement that visas be obtained before arrival is a deterrent for would-be tourists. According to the report, Ghana has only 750 hotel rooms at three-star standard and above, and nearly all are in Accra.

In a recent survey for Fortune magazine, Ghana’s tourist board has forecast that 305,000 visitors will arrive in 1996, spending an estimated total of $305m. It reports 286,000 visitors last year, and earnings of $233m. However, analysts are wary of such figures because they appear to include visiting businessmen and expatriate Ghanaians (who tend to stay with relatives, spending little on traditional tourist pursuits).

Appendix 1

Quarterly indicators of economic activity in Ghana

1993 1994 1995 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Agriculture Qtrly totals Cocoa: exports ’000 tons 74.1 71.5 69.9 50.7 69.0 48.7 62.4 79.1 65.9 n/a Prices Monthly av Consumer prices, Accra: 1990=100 167.3 170.8 183.2 195.0 207.5 225.1 255.1 304.3 350.6 382.8 change year on year % 25.8 27.0 22.1 21.0 24.0 31.8 39.2 56.1 69.0 70.1 Cocoa, New York & London US cents/lb 51.5 60.1 57.4 61.7 69.5 64.7 67.5 65.8 63.0 63.7a Money End-Qtr M1, seasonally adj: C bn 395.40 417.51 441.99 491.48 571.41 627.64 688.36 749.24 781.92 837.36 change year on year % 46.9 27.9 28.5 31.3 44.5 50.3 55.7 52.4 36.8 33.4 Foreign trade Qtrly totals Exports fobb $ m 276.6 295.0 346.2 404.9 387.7 401.7 430.9 441.3 431.4 386.3 cocoa beans “ 47.1 49.2 67.9 58.5 87.0 52.4 113.3 148.8 129.8 26.5c Imports cifb ” 554.0 496.9 480.7 455.0 484.2 659.2 587.3 594.2 600.1 774.1 Exchange holdings End-Qtr Monetary authorities: goldd $ m77777979807978807979 foreign exchange “ 277 385 330 413 538 554 614 421 590 669 Exchange rate Market rate C:$ 699.30 819.7 934.6 943.4 980.4 1,052.6 1,111.1 1,176.5 1,298.7 1,449.3

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Average for 1 Qtr, 1996, 61.4; average for April-May 1996, 67.6. b DOTS estimate. c Total for October-November. d End-quarter holdings at quarter’s average of London daily price less 25%.

Appendix 2

Foreign trade in Ghanaa ($ ’000; monthly averages) UK USAb Germany Jan-May Jan-May Jan-Dec Jan-Dec Jan-Dec Jan Dec Exports to Ghana fob 1995 1996 1993 1994 1993 1994 Food, drink & tobacco 1,073 1,265 3,493 2,848 551 336 of which: cereals & preparations 173 344 3,131 2,679 72 90 Textile fibres 409 379 593 402 397 202 Petroleum & products 252 245 17 426 294 240 Chemicals 4,117 4,497 2,823 1,150 913 922 Paper & manufactures 462 819 642 34 86 266 Textile yarn, fabrics & manufactures 306 239 256 191 82 70 Non-metallic mineral manufactures 387 418 324 38 196 118 Iron & steel 1,035 932 121 191 479 137 Metal manufactures 1,899 2,361 507 150 328 435 Machinery incl electric 11,149 11,039 5,275 2,678 2,763 2,931 Transport equipment 2,151 4,568 1,020 796 1,614 2,136 Total incl others 28,005 34,869 17,608 10,114 8,881 8,643

UK Germany USAb Jan-May Jan-May Jan-Dec Jan-Dec Jan Dec Jan-Dec Imports from Ghana cif 1995 1996 1993 1994 1993 1994 Cocoa beans 10,238 15,531 3,978 5,700 4,216 934 Cocoa butter 442 1,705 36 1,662 0 0 Wood 1,866 1,133 3,418 3,712 157 228 Industrial diamonds 0 2 40 42 383 403 Metalliferous ores & scrap 947 1,093 320 381 0 0 Petroleum & products 0 503 2 146 1,083 2,032 Non-metallic mineral manufactures 0 6 9 8 10,142 11,940 Aluminium & alloys 6,681c 3,357c 7,521 7,101 68 403 Total incl others 23,887 26,862 16,326 20,097 18,203 17,132 a Figures from partners’ trade accounts. b US exports to Ghana averaged $10.5m and $19.7m per month in the period January-May 1995 and 1996. US imports from Ghana averaged $18.6m and $15.7m per month in the period January-May 1995 and 1996. c Including other non-ferrous metals.

Appendix 3

Direction of tradea

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports fob 1993 1994 1995 Imports cif 1993 1994 1995 Germany 14,833 18,250 19,475 UK 29,667 26,833 34,100 UK 8,167 16,083 19,425 Nigeria 27,750 28,583 32,300 USA 16,583 15,583 15,367 Germany 9,750 9,500 14,733 Togo 8,917 10,167 13,067 USA 19,667 11,417 14,400 France 4,833 7,167 10,442 Italy 4,917 13,667 12,175 Total incl others 103,333 132,917 140,825 Total incl others 4,917 13,667 212,975 a DOTS estimate.