Country Profile

COUNTRY PROFILE

Ghana

Our quarterly Country Report on Ghana analyses current trends. This annual Country Profile provides background economic and political information.

1998-99

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 50 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.

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Comparative economic indicators, 1997

Gross domestic product Gross domestic product per head $ bn $

Nigeria 29.2 Côte d'Ivoire

Côte d'Ivoire Guinea

Ghana Senegal

Senegal Mauritania

Guinea Ghana

Mali Benin

Burkina Faso Togo

Benin The Gambia

Niger Nigeria

Togo Mali

Mauritania Guinea-Bissau

The Gambia Burkina Faso

Guinea-Bissau Niger

024681012 0 100 200 300 400 500 600 700 Source: EIU estimates. Source: EIU estimates.

Gross domestic product Consumer prices % change, year on year % change, year on year

Burkina Faso Ghana

Mali Guinea-Bissau

Guinea-Bissau Nigeria

Côte d'Ivoire Côte d'Ivoire

Ghana Mauritania

Mauritania Benin

Guinea Togo

Togo Niger

Niger The Gambia

Nigeria Guinea

The Gambia Burkina Faso

Senegal Senegal

Benin Mali

01234567 -5 0 5 10 15 20 25 30

Sources: EIU estimates; national sources. Sources: EIU estimates; national sources.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 1

June 25th 1998 Contents

3 Basic data

4 Political background 4 Historical background 8 Constitution and institutions 9 Political forces 10 International relations and defence

11 The economy 11 Economic structure 12 Economic policy 14 Economic performance 15 Regional trends

16 Resources 16 Population 16 Education 17 Health 18 Natural resources and the environment

19 Economic infrastructure 19 Transport and communications 20 Energy provision 21 Financial services

23 Production 23 Manufacturing 24 Mining and semi-processing 25 Agriculture and forestry

27 The external sector 27 Merchandise trade 29 Invisibles and the current account 30 Capital flows and foreign debt 31 Foreign reserves and the exchange rate

32 Appendices 32 Regional organisations 42 Sources of information 44 Reference tables 44 Government finances 44 Money supply 44 Interest rates 45 Gross domestic product 45 Gross domestic product by expenditure 46 Gross domestic product by sector 46 Price indices

46 Population and labour force 47 Transport statistics 47 Stockmarket indicators 48 Manufacturing production 48 Minerals production 48 Production of selected food crops 49 Exports 49 Main trading partners 50 Balance of payments, IMF estimates 50 Balance of payments, national estimates 51 External debt, World Bank estimates 51 Net official development assistance 52 Foreign reserves 52 Exchange rates

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Basic data 3

Ghana

Basic data

Land area 238,537 sq km

Population 18.5m (mid-1997 EIU estimate)

Main towns Population in ’000 (1988, national estimates)

Accra (capital) 972 Tema 440 Kumasi 206

Climate Tropical

Weather in Accra Hottest months, March, April, 23-31°C; coldest month, August, 22-27°C; driest (altitude 27 metres) month, January, 15 mm average rainfall; wettest month, June, 178 mm average rainfall

Languages English (official), Ewe, Fante, Ga, Hausa, Twi

Measures Metric system

Currency Cedi (C)=100 pesewas. Average exchange rate in 1997: C2,050:$1. Exchange rate on June 19th 1998: C2,320.0:$1

Time GMT

Holidays January 1st, January 7th, March 6th (Independence), Good Friday, Easter Monday, May 1st, July 1st, December 25th-26th

Political background

Ghana is a unitary republic with a multiparty democratic system. The National Democratic Congress (NDC) won the democratic elections in both 1992 and 1996, having already ruled the country for over a decade following a military coup in 1981. The NDC’s charismatic leader, Jerry Rawlings, is constitutionally barred from contending the 2000 presidential election and the vice-president, John Atta Mills, is expected to stand in his place.

Historical background

Early history Ghana’s history is better documented than that of most countries in Sub- Saharan Africa, because of the area’s early importance in regional and inter- continental trading networks. The Akan, the largest ethnic group in present- day Ghana, have predominated since at least 1400, when chiefs based in the central forest supplied kola nuts and gold to the trans-Saharan caravan trade to the north. By 1700 several chiefs from the forest had subdued their rivals with guns bartered from European coastal traders and established the Ashanti kingdom. They built a highly organised hierarchical political system of remarkable military strength, which extended Ashanti control over all forest routes to the coast, and with it the supply of slaves and gold.

The coast, named the Gold Coast by Portuguese gold traders a century earlier, was dominated by a different Akan subgroup of Fante-speaking peoples. An estimated 1m people were channelled into the slave trade, a regional tradition that was internationalised by Dutch traders but brought to its zenith by the British in the 18th century.

The British came as traders. However, in the late 19th century Anglo-French rivalry brought a shift in favour of territorial acquisition. During the scramble for Africa, Britain invaded the Ashanti kingdom in 1874 and declared the Gold Coast a British colony, which, after a struggle, it controlled by 1901.

The British opted for a colonial economy based on peasant cash-crop production, mainly of cocoa, and on gold mining, controlled by foreign interests. Farmers’ initiatives and local familiarity with international trade brought relative prosperity. The Gold Coast became one of Africa’s most successful colonial economies.

The earliest political movements were dominated by lawyers and other educated elites who had been excluded from politics by the colonial state. After the second world war other social groups also became involved. The newer recruits wanted more jobs in the administration and business opportunities in the colonial system. By 1949 nationalists split into moderates and radicals, the latter supporting Kwame Nkrumah’s Convention People’s Party (CPP). Backed mainly by young people and poorer sections of the middle class, the CPP won elections and in 1957 made Ghana the first country to gain post-colonial independence in Sub-Saharan Africa.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Historical background 5

The causes of Ghana experienced nine changes of government including four military coups post-independence between 1957 and 1983, but has escaped the violence that afflicted many other instability African countries. For the most part, economic management and the distribution of resources between interest groups have been the commonest sources of dissatisfaction. In contrast to much of Africa, ethnicity has played a relatively minor role in mainstream political conflicts.

The Socialist CPP The CPP government was ostensibly socialist, with a mainly southern, urban- based constituency. The CPP laid much of the basis of Ghana’s present industrial infrastructure but its policies alienated cocoa farmers and influential private-sector businesses. It introduced a one-party state in 1964 and became corrupt and intolerant of criticism.

The NLC and PP: attempts In 1966 an economic crisis and rumours of cuts in the military’s resources at structural adjustment prompted Ghana’s first (bloodless) military coup, by conservative generals, who formed the National Liberation Council (NLC). The NLC raised cocoa producer prices, devalued the currency and sought to clear up corruption, before holding elections and handing over to the laisser-faire Progress Party (PP) after elections in 1969. The PP continued the NLC’s economic reforms. However, a fresh economic crisis—and PP efforts to rectify it with a tough budget and devaluation—brought another military coup in January 1972.

The NRC: a descent into The younger left-wing colonels of the National Redemption Council (NRC), led kleptocracy by Ignatius Acheampong, reversed the PP’s policies in favour of socialist programmes but these dragged the economy to new lows and corruption was raised to unprecedented levels. In the late 1970s Mr Acheampong was removed by other defence chiefs who favoured a return to civilian rule.

The 1979 and 1981 coups Before elections could be held, younger officers and other ranks staged a fresh coup after forming the Armed Forces Revolutionary Council (AFRC), led by the instantly popular 28-year-old Flight Lieutenant Jerry Rawlings. The left-leaning AFRC set itself the limited mission of “house cleaning” (flushing out corruption) and handing over to civilian rule, which it duly did in September 1979, to the People’s National Party (PNP) under the Third Republic. The PNP failed to deliver either a better economy or clean government and the soldiers who had once led the AFRC staged a further coup, in December 1981, and this time remained in power for ten years.

The PNDC: a military The new Provisional National Defence Council (PNDC) government was in- technocratic regime itially radical and socialist in complexion. It was supported by students, workers and many more groups of Ghanaians sickened by corruption and economic mismanagement. Dismissing party-based politics as corrupt and divisive, it launched a military technocratic regime, under which Mr Rawlings and other military figures focused on domestic security and on rooting out corruption, while “experts” ran the economy.

Socialist rhetoric and The regime had been in power only a few years when Ghana suffered severe free-market reform drought. Desperate for hard currency, some PNDC members sought a deal with the IMF. This set off an internal struggle won by the pro-reformers, and the

radicals went into silent opposition. While continuing to espouse socialist and anti-imperialist rhetoric, the PNDC went on to implement one of Africa’s first and longest-sustained structural adjustment programmes (SAP). This stabilised the economy and brought several years of growth but inevitably alienated the PNDC’s erstwhile allies. In their silent dissent they joined other, mainly middle-class groups resentful of the PNDC.

After 1985 the PNDC identified a fresh constituency: Ghana’s impoverished rural areas, which had been neglected by all previous governments. Although the government’s concern was genuine, its new focus also coincided with changes in donor priorities, which emphasised revival of the agricultural sector, the removal of urban and industrial subsidies and, on the political front, a return to multiparty democracy.

In the late 1980s Mr Rawlings launched “partyless” local elections in line with his conviction that parties were incapable of looking holistically at the country’s interests. These were intended to pave the way for a national system of partyless democracy but the idea was shelved in response to bilateral donors’ demands for multiparty reform.

The 1992 elections In November 1992 the PNDC held Ghana’s first multiparty elections for more than a decade. Five candidates stood for president, while six parties entered the parliamentary election, including the National Democratic Congress (NDC), the new face of the PNDC. In general, the elections were free and fair, and were endorsed by international observers. However, the opposition did suffer disad- vantages, as the late registration of parties had deprived them of time to organise.

The NDC saw its main rivals in the Nkrumahists, whose support base was in urban areas. To divide them it set up its own Nkrumahist party, the National Convention Party (NCP). The introduction of the People’s National Convention (PNC), set up by the late Hilla Limann, caused further splits. The NDC’s other strategy focused on marginal urban areas, where it gave pay rises to public-sector workers.

Mr Rawlings won the presidential race, with 58% of the vote, compared with 30% for his nearest rival, Professor Albert Adu Boahen of the New Patriotic Party (NPP). The opposition claimed fraud and boycotted the December parliamentary election. However, analysts believe that Mr Rawlings won because he was able to claim—with some justification—the credit for Ghana’s economic turnaround, and because he was more charismatic than Professor Adu Boahen.

The results left the NDC with complete control of parliament, which rarely challenged the executive. The opposition parties, excluded from the legislature by their own boycott, tried to strengthen their influence through other chan- nels. The NPP used its many lawyers in the judiciary to challenge the government on constitutional issues. Most of the opposition Nkrumahists regrouped into the People’s Convention Party (PCP), in a bid to restore the movement’s credibility after the fractures during 1991-92. The PNC decided to go it alone, and the NCP’s pro-government Nkrumahists joined the NDC.

The 1996 elections The 1996 elections seemed to offer the prospect of a close contest. The NPP and PCP formed an alliance to field a single presidential candidate, John Kuffour,

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Historical background 7

and a single candidate in each constituency, believing that this demonstration of unity would be enough to unseat the government. The PNC fielded a third presidential candidate, Edward Mahama.

However, the president and the NDC fought a well-organised campaign that stressed the government’s track record on spending and infrastructural development, while capitalising on its control of the state-owned media and struc- tures of patronage. It also undermined the opposition by co-opting many PCP officials and candidates to the NDC fold.

Ultimately, therefore, neither the opposition’s strategy nor the higher turnout (75% of eligible voters compared with 48% in 1992) made much material differ- ence in the presidential election. Mr Rawlings won a majority in every region except Ashanti—the NPP’s heartland. In addition, in a near repeat of 1992, he gained 57.5% of the vote. Mr Kuffour received 39.5% and Mr Mahama 3%.

In the legislative poll and subsequent run-offs, the opposition won 67 seats, compared with 11 in 1992, but this still left the NDC with a workable majority. The NPP-PCP alliance made a strong showing in Ashanti and performed well in the Eastern and Greater Accra regions. But the geographical base of its support reinforced its image as a southern-based party dominated by Ashanti leaders. The results also reinforced the NDC’s position as the only grouping with a national support base.

Since 1996 the NDC has been preoccupied with factional rivalry ahead of the elections in 2000 in which Mr Rawlings cannot constitutionally stand for a third term. By June 1998 the succession issue had sharply divided the party, and, in a bid to minimise the damage, Mr Rawlings endorsed his popular but inexperi- enced vice-president, John Atta Mills, as his preferred successor. The nomina- tion ruled out any change to the constitution and the suggestion that the first lady, Nana Konadu Rawlings, stand as the NDC candidate. This should ease tensions within the party while enabling Mr Rawlings to retain considerable influence after he steps down.

Election results

1992 1996 Votes % of Votes % of Presidential election (’000) total (’000) total Jerry Rawlings (NDC) 2,327 58.3 Jerry Rawlings (NDC) 4,092 57.5 Professor Albert Adu Boahen (NPP) 1,213 30.4 John Kuffour (NPP) 2,807 39.5 Hilla Limann (PNC) 267 6.7 Edward Mahama (PNC) 210 3.0 Kwabena Darko (National Independence Party) 114 2.9 Emmanuel Erskine (People’s Heritage Party) 68 1.7 Total 3,989 100.0 7,109 100.0

Legislative election No. of seats No. of seats National Democratic Congress (NDC) 189 National Democratic Congress (NDC) 132 National Convention Party (NCP) 8 New Patriotic Party (NPP) 61 Independents 2 People’s Convention Party (PCP) 5 Every Ghanaian Living Everywhere (EGLE) 1 People’s National Convention (PNC) 1 Total 200 199a a Includes a subsequent re-run in one constituency, and a by-election. Another by-election pending at time of writing.

Sources: Electoral Commission, Accra; Ghanaian embassy, London.

Important recent events

November 1992: Flight Lieutenant Jerry Rawlings (retired) is elected as president, comfortably defeating his main rival, Professor Adu Boahen.

December 1992: The National Democratic Congress (NDC, Mr Rawlings’s political party) takes 189 seats out of 200 seats in parliament. Opposition parties boycott the poll.

February 1994: Widespread Konkomba-Nanumba clashes in the north leave 500 dead.

November 1994: Opposition parties announce that they will field a common presidential candidate in the elections of November 1996.

1995-96: The NDC shows increasing signs of becoming factionalised.

December 1996: The NDC loses 57 seats in parliament, mostly to the New Patriotic Party (NPP).

June 1998: Mr Rawlings endorses the vice-president, John Atta Mills, as his preferred successor in the December 2000 presidential election.

Constitution and institutions

Constitutional changes Ghana’s first constitution at independence in 1957 was based on the UK system of multiparty parliamentary democracy. However, it was changed within three years when Ghana became a republic, with Kwame Nkrumah as president. In 1964 the CPP government instituted a one-party state and the 1960 constitution was amended. Constitutional arrangements were further trans- formed under seven more changes of government.

The present constitution, which forms the basis for the Fourth Republic, was established in 1992, when Ghana held its first multiparty elections since 1979. Much of it is based on the US system, vesting executive power in a president elected by universal suffrage every four years. Tenure is limited to two four-year terms. The cabinet is appointed by the president, on approval by the legislature, a single-chamber parliament consisting of a minimum of 140 members of parliament (MPs) elected on a first-past-the-post basis. Candidates can be fielded by parties or stand as independents.

The absence of a real opposition and the inexperience of most NDC members of parliament made for a rather compliant legislature during 1992-96. How- ever, opposition parties have become more vocal in parliament since the last elections, which gave them 67 seats—enough to scrutinise legislation, press for more transparency in executive business and raise the level of parliamentary debate.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Political forces 9

Political forces

Mr Rawlings introduces a Until Mr Rawlings came to dominate the political scene, Ghana had two polit- third force ical traditions: the Nkrumahist strand representing the socialist policies that were followed after independence; and the laisser-faire tradition that succeeded Mr Nkrumah. However, Mr Rawlings’s quest for broad-based development introduced a third force into Ghanaian politics. The transition to democracy and the neutralisation of the military by Mr Rawlings have cemented the position of the National Democratic Congress (NDC) as the party associated with aid and economic reform.

Party allegiances and The NDC’s policy of promoting broad-based development favouring rural areas policies is illustrated by the government’s record and the fundamental changes it has brought to the economy. The NDC’s support lies mainly in rural areas that have benefited from increased investment and possibly among non-Ashanti business people aware of the regime’s growing commitment to expansion of the private sector. The 1996 election results confirmed the NDC as the only party with a national base.

Although the two opposition parties are highly critical of the NDC’s shortcomings, neither has come up with a clear alternative. This reflects a lack of coherence and, for the electorate, represents a lack of real choice. If the aid associated with economic recovery is to continue, current policies and reforms need to be sustained.

The People’s Convention Party (PCP) is supported by left-leaning groups, who draw inspiration from Mr Nkrumah and the days when Ghana led Africa to independence. Such groups include trade unions, students, academics and other educated elites. The Nkrumahists’ agenda appears to favour urban inter-

Main political figures

Jerry Rawlings: Head of state since seizing power in 1981, elected president in 1992 and again in 1996.

Nana Konadu Rawlings: The president’s wife and a powerful political figure in her own right, she has been accused of factionalising the NDC.

John Kuffour: A lawyer, he stood as the Nkrumahist candidate in the December 1996 presidential election.

Joseph H Mensah: A minority leader in parliament.

Professor Albert Adu Boahen: Mr Rawlings’s main opponent in the 1992 poll, he remains a powerful force in the Ashanti heartlands of central Ghana.

John Atta Mills: A law professor and former head of the internal revenue service before being appointed as a compromise candidate for the position of vice-president. He has been endorsed by Mr Rawlings as his preferred successor for the December 2000 presidential election.

ests, higher spending on health and education and looser fiscal and monetary discipline.

The Ashanti region is the main support base of the New Patriotic Party (NPP) and its predecessors. As the only party of business, the NPP has at times enjoyed broader appeal. However, because many Ghanaians believe it serves Ashanti business interests only, wider cross-regional support is not guaranteed. Since 1992 opportunism has taken the NPP leadership away from its traditional policy line. The party has exploited dissatisfaction with pay and value-added tax (VAT) to flirt with the trade unions and has endeavoured to stir up nationalist senti- ment against foreign investment by challenging the sale of shares in the Ashanti Goldfields Corporation, Ghana’s main gold producer, to foreigners.

International relations and defence

Links with the East and Shortly after the Provisional National Defence Council (PNDC) came to power West in 1981 its left-leaning policies enabled the party to strengthen its contacts with former Eastern bloc countries, namely the Soviet Union, Cuba and Libya. However, the PNDC quickly showed that it was willing to maintain and improve links with other developed countries from which it sought substantial financial and technical assistance, as well as with multilateral organisations such as the IMF and the World Bank. Relations with the US have been fraught with tension but have improved greatly since the beginning of the 1990s. Mr Rawlings made his first official visit to the US in early 1995 and the US president, Bill Clinton, visited Ghana in March 1998, on the first leg of his six-nation tour of Africa.

Relations with Nigeria are ambiguous. In the past Nigeria’s military government had been cold towards Mr Rawlings but there were signs that the relationship had improved in May 1997, when Mr Rawlings called on the Commonwealth to support Nigeria in its efforts to rejoin the organisation. There were further changes in mid-1998 when a high-ranking Nigerian official accused Ghana of plotting against the regime of General Sani Abacha, who has since died. It is so far unclear how relations with Nigeria will be affected by the new Nigerian regime. Relations with Côte d’Ivoire and Togo were uneasy throughout much of the 1980s as both countries played host to Ghanaian opposition movements. Since the mid-1990s the Rawlings government has had a working, if not warm, relationship with both countries. Relations with Burk- ina Faso to the north were excellent under Thomas Sankara, a close personal friend of Mr Rawlings, but Ghana was initially wary of his successor, Blaise Compaore. Relations have since thawed, and indeed, relations with many regional neighbours have improved since Ghana’s transition to democracy. Mr Rawlings’s chairmanship of the Economic Community of West African States (Ecowas; see Regional organisations) for the 12 months to July 1995 further enhanced Ghana’s standing in the region.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Economic structure 11

The economy

Economic structure

Main economic indicators, 1997

Real GDP growth (%) 5.1a/3.0b Consumer price inflation (av; %) 27.8 Current-account balance ($ m) –436 Total external debt ($ m) 6,405 Exchange rate (av; C:$) 2,050 Population (m) 18.50

a Government estimate. b IMF estimate.

Source: EIU.

Agriculture is the Agriculture continues to be the mainstay of Ghana’s economy, accounting for mainstay of the economy 40-45% of GDP in 1992-96. Although cocoa is perhaps the country’s best-known crop, food crops are by far the most important contributor to agricultural output and alone make up around 30% of GDP. The other main sector is services, largely trade and public services, which accounts for 45% of GDP. Industry’s contribution hovered at around 14% in 1992-96, led by manufacturing with 8%. (Further details on GDP by sector are given in Reference table 6.)

The National Democratic Congress (NDC) has tended to favour the rural economy more than any previous government, making a greater investment in infrastructure and offering higher producer prices. However, agriculture—with the exception of cocoa—has generally performed sluggishly, although growth has picked up since 1995, to around 3.8% per year.

Recent World Bank data estimate that private consumption accounted for around 79% of GDP in 1996, and put government consumption at 12%. Gross domestic investment accounted for 19% in 1996. (Historical data on GDP by expenditure are provided in Reference table 5.)

Comparative economic indicators, 1997 Côte South Ghana d’Ivoire Nigeria Africa UK GDP ($ bn) 6.9a 10.5 30.7b 129.3 1,287.7 GDP per head ($) 372 743 286 3,411 21,839 Consumer price inflation (av; %) 27.8 4.9 29.3 8.6 2.8 Current-account balance ($ bn) –0.4 55.0 2.3 –1.7 10.0 (% of GDP) –6.3 0.5 7.5 –1.2 0.8 Merchandise exports fob ($ bn) 1.5 4.4 15.6 29.9 277.8 Merchandise imports fob ($ bn) –1.7 –2.7 –8.2 –27.7 –298.8 External debt ($ bn) 6.4 17.30 35.2 35.9 n/a Debt-service ratio, paid (%) n/a 24.2 12.0 11.2 n/a a EIU estimate. b Autonomous exchange rate used for conversion.

Source: EIU.

Economic policy

The economy had great At independence, Ghana’s economic prospects were extremely good. It was the potential world’s largest producer of cocoa, it had healthy mining and timber sectors, and also, by regional standards, a relatively well-developed manufacturing sector. Kwame Nkrumah’s Convention People’s Party (CPP) government sought economic expansion through rapid industrialisation, directed and mainly funded by the state, using funds derived from the cocoa sector. The programme succeeded in establishing what industrial capacity Ghana has today, but implementation was made difficult by inadequate planning and a precipitous col- lapse in the world price of cocoa. The government allowed the fiscal deficit to widen and failed to adjust the national currency, the cedi, to reflect growing current-account deficits.

Recovery— The subsequent two decades were characterised by economic mismanagement, but in 1983 the government launched an Economic Recovery Programme (ERP), drawn up with guidance from the IMF and the World Bank. The first phase, in 1983-86, focused on stabilising the economy by restoring fiscal discipline, restraining credit expansion and introducing realistic exchange-rate management, and in 1986 the government’s accounts went into surplus for the first time in many years. Import licences were abolished and a foreign- exchange auction system was established.

—and reform The second phase, in 1987-88, was aimed at structural reform. While fiscal and monetary discipline was broadly maintained, cuts were made in the civil service and the Ghana Cocoa Board. New investment codes were drawn up for mining and the rest of the economy. The foreign-exchange auction system was unified with the official rate and almost all imported goods became eligible for auction funds.

From 1989 to mid-1992 the government implemented deeper structural and institutional reforms. Financial-sector adjustment cleared bad loans from banks’ balance sheets and improved regulation by the Bank of Ghana (the central bank). In 1990 the government set up the Accra stock exchange to lay the foundations for a domestic capital market. The foreign-exchange system was gradually liberalised, with the closing of the auction and its replacement with an interbank market.

Deceleration and some Since Ghana’s return to multiparty democracy in 1992, the government has backtracking, 1992-95 veered between large deficits in election years and corrective fiscal policies in between. It has also implemented several fundamental reforms, albeit more slowly than donors and local businesses would like. Reforms include privatisation, which has shed government stakes in nearly 200 enterprises.

Fiscal lapses during election years have tended to saddle the government with problems that have proved difficult to resolve in subsequent years. Large public-sector pay rises in advance of the 1992 elections turned five years of surplus into a large deficit that helped to fuel inflation, substantially enlarged Ghana’s domestic debt, and crowded out private-sector borrowing.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Economic policy 13

Recent fiscal performance After a brief return to fiscal surpluses in 1994 and 1995, election pressures derailed the government yet again, when overspending on vote-winning capital projects, among other things, returned the 1996 accounts to a deficit of C335bn ($204.6m). Although the finance minister, Richard Kwame Peprah, took corrective measures in 1997, imposing severe cuts in capital spending and a tight lid on most recurrent outlays, these failed to deliver the 1997 forecast budget surplus of C191bn. Instead the budget recorded a provisional deficit of C297bn caused not only by debt accumulated from the 1996 deficit but also by the government’s maintenance of high interest rates to fight inflation, and a shortfall in revenue from sales taxes, privatisations and donor grants. Mr Peprah is now endeavouring to put public finances back on track, with a tough 1998 budget, which he hopes will also woo donors into accelerating aid disbursements.

Mr Peprah has also changed the budget format from “narrow” to “broad based”. The latter includes external financing to give a clearer picture of the role of donor finance in fiscal operations. However, the 1998 budget is unlikely to meet its targets. Revenue is likely to fall short as the budget assumes a 15% rate of value-added tax (VAT), while parliament approved an increase of only 10%. The budget also failed to factor in the fiscal implications of a serious electricity crisis, which began at the end of 1997, and is not expected to abate until the end of 1998. (For historical data on government finances, see Refer- ence table 1.)

Government finances (C bn unless otherwise indicated) 1997 1996 Provisional Provisional 1998 Actuala Budgeta outturna Budgetb Outturnb Budgetb Revenue 2,219 2,944 2,616 3,342 2,674 4,021 Tax revenue & grants 2,075 2,769 2,513 3,167 2,571 3,821 Divestitures 143 175 103 175 103 200 Expenditure 2,555 2,753 2,914 3,883 3,848 5,053 Recurrent 1,861 2,084 2,290 2,084 2,290 2,834 Capital 682 669 539 1,732 1,473 2,171 of which: foreign-funded – – – 1,130 934 1,432 Reduction in arrears 12 67 84 67 84 48 Overall balance –335 191 –297 –540 –1,174 –1,032 Financing Foreign (net) –195 –245 –430 486 446 576 Domestic (net) 531 54 728 54 728 456 Primary balance 34 612 459 612 460 701 % of GDP 0.3 4.5 3.4 4.5 3.4 4.0 a Narrow definition: excluding foreign-funded capital spending. b Broad definition: including foreign-funded capital spending.

Source: 1998 budget presentation.

Economic performance

Growth remains The reform programme of the National Democratic Congress (NDC) govern- dependent on the public ment reversed the economic decline that prevailed during the 1970s. After sector contracting in 1973-83 GDP grew by more strongly in 1983-93, and since 1993 it has averaged 4.3% annually. (See Reference table 4 for historical data on GDP growth.) The 1998 budget provisionally estimated growth in 1997 at more than 5%. However, the IMF has estimated real GDP growth in 1997 at 3% and the contradiction has not been resolved although the government’s figure seems high, given tight fiscal policies and the electricity crisis that reduced economic activity at the end of 1997.

The recovery since the 1970s has been most marked in the main export sub- sectors. The restoration of incentives has drawn fresh investment into mining, where output has more than quadrupled since the mid-1980s, and brought a recovery in cocoa output. However, performance in Ghana’s main sector, agriculture, remains very much at the mercy of the climate. Between 1992 and 1997 agricultural growth has averaged around 3.4%. Services are led by retail and wholesale trade, with an annual growth rate ranging between 4.6% and 7.7%.

Gross domestic product (% real change) Annual average 1996 1992-96 GDP 5.2 4.3 Agriculture 4.0 3.6 Industry 4.2 4.1 Services 6.3 6.7 Regional comparisons Côte d’Ivoire 6.8 4.8 Nigeria 3.3 2.8 Sources: Centre for Economic Policy Analysis, based on Ghana Statistical Service data; EIU.

Economic growth has traditionally been fuelled by public-sector investment, and, until recent years, the political and economic climate was inhospitable to private business. Since the early 1990s the government has eased regulations. However, its fiscal and monetary lapses have rendered many of the more pro- business measures irrelevant. The fiscal shock of 1992 prompted a 42% decline in private investment, and inflationary deficit financing has crowded out private-sector borrowers with high nominal interest rates of between 35% and 48% in recent years (see Reference table 3 for further details about interest rates).

Since domestic savings also remain low, economic growth depends on foreign capital inflows. The Development Assistance Committee calculates that disbursements from all donors totalled $653.6m in 1996, a marginal increase on year-earlier levels. While Ghana has a substantial pipeline of undisbursed funds to draw on, new aid commitments will decline in coming years. This is because donors plan to retreat from funding infrastructure and other projects that can be financed by private investors and Ghana will have to make a more concerted effort to attract foreign private investment in the future. (More detailed information on net official development assistance is shown in Reference table 19.)

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Inflation remains a In the 1990s the rate of inflation has fluctuated between 10.1% (in 1991) and problem 74.3% (in 1995). Since 1996 the government has targeted inflation using pay restraint, high interest rates and exchange-rate policy. These policies have helped lower the rate significantly but it remains high by international standards, at an average of 27.8% in 1997.

Food output and money supply are the key determinants of inflation. Food accounts for 49% of the consumer price index and during harvest time (July- September) inflation tends to slow, while Ghana’s low level of monetisation makes prices sensitive to monetary expansion. Money supply grew by 32.6% annually in 1996 and 40.1% 1997, overshooting the respective budget targets of 5% and 15% (see Reference table 2 for further information on money supply; see Reference table 7 for data on consumer prices). The main causes of monetary expansion have been unplanned expansion of credit to the public sector and miscalculations of the timing and size of the annual cocoa crop. In the past unexpectedly large harvests have led to large inflows of foreign exchange which have pushed up money supply growth.

Inflation (% change) Annual average 1997 1993-97 Consumer prices 26.8 33.6 Regional comparisons Côte d’Ivoire 4.9 10.2 Nigeria 8.5 44.9 Sources: Bank of Ghana, Quarterly Statistical Bulletin; EIU.

Regional trends

Before the 1980s governments tended to focus capital investment and projects on southern Ghana where Ghana’s elites have tended to have their homes and constituencies. In addition, the bulk of Ghana’s most precious natural resources—gold, timber and cocoa—and its industry and commerce are in the Western, Central, Ashanti and Accra regions. The railway, which runs from Accra to Kumasi, then to Sekondi and the port of Takoradi, sums up the most important trade orientations. Roads link other regions.

Although one of the poorest in terms of infrastructure and income per head, Western region is home to Takoradi port, Tarkwa, the former state gold mine, and the forests from which most of Ghana’s timber is drawn. Ashanti is the richest of the regions because it contains the bulk of gold resources—at the Obuasi mine owned by the Ashtanti Goldfields Corporation—and a large share of the country’s cocoa trees.

Northern Ghana—Upper West, Upper East and Northern regions—is the main area producing staple foods. These regions were heavily neglected until the PNDC came to power in 1983. The government has since invested heavily in the area, partly out of a genuine desire to compensate for previous governments’ neglect and partly because donors advocated pursuit of more even regional development. Since then, the NDC has recognised that investment in the area has paid off politically. Investments include extension of the national

electricity grid, significant rehabilitation of north-south roads and greater expenditure on education. During the past three years the region has suffered from violent ethnic clashes between the Konkombas and the Nanumbas, Gonjas and Dagombas. The heart of the problem lies in pressure on land resulting from the influx of many groups across the Togo-Ghana border into Yendi, Tamale and surrounding villages. The Konkombas, one of these migrant groups, have been pressing for land ownership rights against the wishes of the Nanumbas and other groups.

Resources

Population

Population, 1996 estimates

Total population (m) 17.5 Population growth rate (%; 1991-96) 3.1 Urban population (% of total) 31 Population aged 65 & above (% of total) 4.8 Source: World Bank, World Development Indicators.

Population growth will Ghana’s population has been growing at around 3% per year since the begin- slow ning of the 1990s, and stood at 17.51m in 1996, according to data from the World Bank. The latter also projects that growth will slow to 2.3% during the next 15 years and that the population will reach 24m by 2010. As a result of an increasingly younger population, Ghana’s labour force, which numbered 8m in 1996, is projected to grow by 50% to reach 12m by 2001. (See Reference table 8 for historical data on population and the labour force.) In 1996 nearly half of the population were under 16 while 4.8% were aged 65 and over.

In 1987 the Ghana Living Standards Survey reported that 80% of people classified as poor (those living on less than two-thirds of the national average income) lived in rural areas, as did almost all those in absolute poverty. The government estimates that the poorest areas are the mid-coast, the Volta Basin and the northern savannah. More recent World Bank data on poverty indicate that in 1992, 31.4% of Ghanaians lived below the poverty line. In rural areas 34.2% live below the poverty line with a slightly lower figure of 27% in urban areas. This appears consistent with reports that while rural poverty seems to be de- creasing, urban deprivation has grown under structural adjustment policies.

Education

Until the 1970s Ghana had one of the most highly developed education systems in West Africa. It declined after 1975, along with the rest of the economy. In response, the National Democratic Congress (NDC) has undertaken an ongoing restructuring of the sector’s organisation and finances—which will be a major challenge. The 1998 World Bank’s World Development Indicators reports that in 1995, 47% of females and 24% of males aged over 15 years were illiterate.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Health 17

Reforms have included changing the structure of the education system to six years of primary, three years of junior secondary, three years of senior secondary and four years of tertiary schooling. The curriculum has been reformed at both primary and secondary levels and made more relevant. Most senior secondary schools offer vocational options in agriculture and technical subjects in addition to general arts and sciences. Controversially, however, rationalisation of the system has included cuts in education service staff and the introduction of cost recovery. For example, Cape Coast University announced plans to charge fees to students in late 1997, to cover faculty facilities, science equipment and exam costs.

In addition, some non-governmental organisations (NGOs) argue that the introduction of fees has caused a decline in school enrolment. This appears consistent with data in the World Bank’s report, World Development Indicators, which suggest a decline in both primary and secondary enrolment ratios between 1980 and 1995. In primary schools the ratio of children enrolled to those eligible fell from 79% to 75% over the period, and the ratio for secondary enrolment fell from 41% to 37%. Fees sanctioned by the Ministry of Education in 1993 were C250-500 (39-77 cents) per year. However, district authorities and parent teacher associations, which now have more responsibility for education, impose their own additional charges, which some parents cannot afford.

The government aims to reallocate more of the sector’s annual budgets towards basic education. Its so-called Free Compulsory Universal Basic Education (FCUBE) programme aims to cater for every child by 2005. However, this ambitious deadline could be rolled back. The strategic plan for the FCUBE was completed in 1995, but has taken longer than expected to implement. More progress was made on the Primary School Development Project, under which the government claims to have opened around 100 primary schools and 110 junior schools a year during 1995 and 1996.

Tertiary education

Ghana has several higher education institutions, the most important of which are the University of Ghana, the University of Science and Technology, the University of Cape Coast and the University of the North. There are also 6 polytechnics, 7 diploma-awarding colleges and 38 teacher training colleges. Total university enrolments were projected to rise to 20,000 by 1997/98. The number of private institutions offering computer and business studies has been rising since 1991— exact numbers are not known.

Health

A mixed record As in other developing countries, Ghana’s health services are severely under- resourced. According to the World Bank’s World Development Indicators, general access to healthcare was only 25% in 1993. The government estimates that only 45% of the rural population has access to health services. Some aid officials, however, contend that the quality of health services has actually improved

during the past decade, thanks to the expansion of primary healthcare and the introduction of some cost recovery, which has put the system on a firmer economic footing.

The report also shows that some services, particularly immunisations, are im- proving. Vaccinations against measles covered 54% of children in 1995, up from 16% in 1980. The percentage of children immunised against Diphtheria, Polio and Tetanus has multiplied over the same period from 7% to 51%.

The government plans further liberalisation in the health sector, having passed legislation permitting private practitioners to fill gaps in state services. The reforms, scheduled for implementation by 2003, should pave the way for more private hospitals in the captial, Accra, and the integration of rural mission hospitals into the national network.

The rate of infant mortality stood at 71 per 1,000 live births in 1996. The main causes of mortality are lack of protection from preventable diseases and con- taminated water. In addition, some 35% of children suffer from malnutrition, a predominantly rural phenomenon, which is especially acute in the savannah zone.

HIV and AIDS Ghana’s AIDS control centre estimated that 150,000-300,000 people were in- fected with the HIV virus at the beginning of 1996, and that some 30,000- 40,000 had full-blown AIDS. The majority of sufferers are women, and some 2-4% of all pregnant women were HIV carriers in 1995, according to research cited by the centre. However, the incidence of infection is beginning to change: in the mid-1980s the ratio of female to male cases was 5:1, whereas by 1995 the ratio had fallen to 1.5:1.

Natural resources and the environment

Ghana has a wide range of natural resources including arable land, forests and sizeable mineral deposits of diamonds and gold, manganese and bauxite. Sev- eral lakes offer considerable potential for additional hydroelectric power, most of which is currently serviced from the vast Lake Volta. Offshore hydrocarbon deposits in the Tano Basin have proven crude oil reserves of 14.3m barrels, and free natural gas reserves estimated at 193bn cu ft. Ghana’s location on the west coast of Africa also permits extensive fishing from the Atlantic.

The climate is tropical, with variations between the northern savannah and the southern coastal areas. The hottest months are March and April, when the temperature often reaches 31°C. The wettest month is June, when average rainfall is estimated at 178 mm, after which the main food harvest comes. The high forest in the south-west extends over 82,000 sq km and covers 34% of the country; it is Ghana’s main source of wood and timber exports. Gold is concentrated in the Ashanti and Western regions, although there are also sizeable deposits in Central and Brong-Ahafo regions. Lake Volta, which supplies the Akosombo Dam, lies to the south-east in Volta region but spreads north and north-west into Northern region (see map). Much of the country’s food is produced in the north, while cocoa, the main cash crop, grows in parts of all the main regions below Northern region.

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Economic infrastructure

Transport and communications

The government has directed a significant part of the aid and capital budget to much-needed improvements in the country’s infrastructure during the past decade, and is now looking more to the private sector to fund new projects. During the 1970s the transport system and ports disintegrated severely, imped- ing exports, imports and internal trade. The telephone system barely func- tioned. Since the early 1980s there have been major repairs to roads, ports and highways, and the national electricity grid has been extended to northern Ghana. However, much more investment is needed and more projects are expected in 1998-99. (Historical transport statistics are given in Reference table 9.)

Roads are being According to government statistics, road transport is the principal domestic improved— carrier, accounting for around 98% of freight moved. The network totals 38,700 km, of which 14,700 km are trunk roads and 24,000 km gravel or earth feeder roads. Roads have been upgraded in small sections each year since the mid-1980s. In 1996 alone the Department of Feeder Roads rehabilitated 1,080 km of feeder roads and regravelled 120 km.

—as are the railways The railway system consists of a triangular network connecting Accra, Kumasi and Takoradi, and has benefited from rehabilitation. However, there is little up-to-date information on how this has improved passenger and freight throughput. The railways have traditionally transported manganese, bauxite, some cocoa, and timber. Further rehabilitation is planned for the Eastern and Central lines, including new engines and rolling-stock. Passenger journeys fell consistently in 1987-93, from 3.4m to 1.4m.

The ports are handling In contrast, throughput has been rising fairly steadily at Ghana’s two ports, more traffic Tema to the east and Takoradi to the west, following rehabilitation works since the late 1980s. This has helped to reduce the turnaround time for ships, which is now estimated to be the quickest in West Africa. While Tema appears to handle the bulk of imports, Takoradi handles most of the exports. The amount of cargo unloaded at Tema has risen consistently, from 2m tonnes in 1985 to 4.2m tonnes in 1996. Loadings at Takoradi more than doubled between 1985 and 1995, from 581,000 tonnes to 1.2m tonnes, but declined to 1.04m tonnes in 1996. The bulk of loadings at Takoradi comprised timber, manganese and bauxite. In the same period (1985-96) Takoradi’s incoming loads rose from 317,000 tonnes to 755,000 tonnes. Inland water transport on Lake Volta is less efficient, mainly because of inadequate port and navigation facilities.

Airline connections are Ghana is well served by international airlines, including the national carrier, good Ghana Airways, which is slated for privatisation. From Ghana’s Kotoka international airport there are direct flights to Europe, the United States, Southern Africa and most countries in the West African subregion.

Telecommunications are It is hoped that Ghana’s ramshackle telecommunications sector will be trans- inadequate formed by new investment and competition. In late 1996 the government sold 30% of Ghana Telecom to a Malaysian-led consortium, G-Com, under terms that require the new investors to install 225,000 new lines by 2002. It also licensed a competitor, the Ashtanti Goldfields Corporation (ACG) consortium, which is bound to install a further 50,000 lines and invest more than $40m during the next decade. While some businesses and banks have already reported significant improvements since privatisation, many domestic consum- ers still complain that the service, including waiting times for lines to be installed, remains inadequate. Capacity in 1995 was 98,000 lines. The World Bank’s World Development Indicators estimates that in 1996 there were 4 working telephone lines per 1,000 people. It also estimates that the average waiting time for a new main line telephone line is over two and half years. Cellphone networks have been operational in Ghana for several years although exact subscription numbers are not available.

Energy provision

The weather dictates the Water is the main source of domestically generated energy, with Lake Volta power supply— and its dam supplying the main hydroelectric power station at Akosombo, and another smaller lake feeding the Kpong plant 40 km downstream. Reliance on water makes power supplies extremely vulnerable to the weather. In late 1997 the Volta dam’s water level fell to 74 metres—the third-lowest level ever recorded, and plunged the country into a full-scale electricity crisis in 1998, which forced many industries to reduce output and has limited Ghana’s exports of electricity to Togo and Benin.

—and the electricity crisis The crisis, and growing demand from Ghana’s expanding mining industry, have hastens the search for hastened government and private-sector initiatives to develop alternative power alternative projects sources, and several projects are now on the drawing board. Ghana’s only oil- and gas-fired power plant, a recently constructed 220-mw station at Aboadse, is scheduled to add 110 mw by the end of 1998. Its owner, the Volta River Author- ity (VRA), the state generator, has also signed an agreement with a US investor to double the plant’s planned capacity to 660 mw in the future. In addition, at the end of 1998 a US-based company, KMR Power, plans to start building a 220-mw gas-fired combined cycle plant. The facility will service the mining industry in western Ghana using gas from Côte d’Ivoire or Nigeria. The crisis has also enhanced the attractions of two projects of Ghana National Petroleum Corporation (GNPC) to construct barge-mounted power plants using gas from the Tano basin. GNPC’s projects should create capacity of 255 mw.

Since 1982 the government and donors have significantly expanded the distribution network, extending the national electricity grid all the way to the north. However, a lack of funds—the utilities had long charged submarket rates—has limited recent investment. The government began to put the system on a more commercial footing in 1997, when it announced plans to raise tariffs in phases during 1998 and 1999.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Financial services 21

Energy balance, 1997 (m tonnes oil equivalent) Oil Gas Coal Electricity Other Total Production 0.00 0.00 0.00 1.60a 5.87 7.47 Imports 1.35 0.00 0.00 0.09a 0.00 1.44 Exports –0.20 0.00 0.00 –0.12a 0.00 –0.32 Primary supply 1.15 0.00 0.00 1.57a 5.87 8.59 Net transformationb –0.15 0.00 0.00 –1.12 0.00 –1.27 Final consumption 1.00 0.00 0.00 0.45c 5.87 7.32 a Expressed as input equivalents, on an assumed generating efficiency of 33%. b Transformation input and output, plus energy industry fuel and losses. c Output basis.

Source: Energy Data Associates.

Financial services

Reforms have put the Financial services have improved in recent years, with the introduction of a banking system on a new stockmarket, the Ghana Stock Exchange, and several new financial insti- sounder footing tutions. The improvements began with the financial sector adjustment programme of 1989, under which the banking sector was forced to clean up its balance sheets, and the government took over bad loans. A new law prescribed minimum capital requirements and capital adequacy ratios, and improved the regulatory and supervisory framework. In December 1997 the sector’s assets totalled C3.8trn ($1.9m). Four institutions, Ghana Commercial Bank (GCB— the country’s largest), Standard Chartered Bank, Social Security Bank (SSB) and Barclays accounted for around 58% of the assets.

Competition has Since 1992 privatisation and the arrival of four new commercial banks have increased— brought increased dynamism to the sector. The four new commercial banks are Trust Bank, Prudential Bank, International Commercial Bank and Metropolitan and Allied Bank. Merchant Banking has also expanded in recent years, with four players now competing for business: Merchant Bank Ghana, Ecobank Ghana and CAL Merchant Bank are well established while First Atlantic Merchant Bank, the most recent arrival, opened for business in 1996.

The government has sold off equity in several wholly or part state-owned banks. After some difficulty finding an active investor for SSB, a consortium of fund managers, led by a UK-based company, Blakeney Asset Management, built up a controlling 51% stake in 1997 and hired a technical partner, Allied Irish Bank, to enhance SSB’s management and services. GCB’s privatisation had a promis- ing start in February 1996, when the initial public offering (IPO) was heavily oversubscribed. Some ten months later, a Malaysian investor, Denko Industrial Corporation, paid a deposit to secure a core stake in GCB. However, the acquisition process has since stalled. By mid-1998 Denko had still to deliver all the funds and an appropriate technical partner to reform GCB. The government plans to put at least two more institutions under the hammer in 1998-99, National Investment Bank and Agricultural Development Bank, both founded as development banks but which now operate on more commercial bank lines. Local bankers believe that the deadlines are ambitious, and do not expect to see them divested until 2000.

—but banks remain Competition has brought some benefits. Commercial banks have introduced risk-averse— many new products, including ATMs and credit-card services, and have improved the turnaround time for cheque clearing and cashing. However, the banks have a limited appetite for lending to small and medium-sized local businesses, which has caused some local resentment. This situation has been exacerbated by government issues of low-risk high-yielding debt, which has accommodated complacency and risk-averse lending policies. The government is expected to reduce its domestic borrowing in 1998-99, suggesting that banks may have to build up stronger relations with local clients.

—as margins widen Regardless of the new competition in the retail banking sector, margins between lending and deposit rates have widened, from around 11-15% in the early 1990s to 20% in mid-1998. In contrast, tough competition has driven merchant banks’ margins down to around 4%. Slow economic growth, and commercial bank encroachment on some wholesale business, has created a situation where more players are competing to service a relatively static group of blue-chip custom- ers—state enterprises, listed companies and foreign investors.

The non-bank financial The non-bank financial sector is growing and diversifying, although it remains sector is relatively relatively small. In the area of securities and capital markets, Ghana has two undeveloped discount houses: Consolidated Discount House (CDH), established in 1987; and the Securities Discount Company (SDC), which followed in 1991. Since the GSE’s opening, several stockbrokers, and at least one unit trust have set up shop. Databank Ghana operates as an investment bank, providing financial advisory and stockbroking services.

There are now 17 insurance companies compared with fewer than 10 in 1993, although the industry remains dominated by two state firms. The government is preparing one of them, State Insurance Corporation, for privatisation. Ghana also has mortgage companies, including the Home Finance Company, building societies, at least one venture capital company and three leasing companies.

A fledgling stockmarket The Ghana Stock Exchange (GSE) began operating in 1990 to trade in corporate equities, bonds and government securities. The securities industries law, which governs the GSE, called for the establishment of a Securities and Exchange Commission (SEC) to oversee and regulate the bourse. As a temporary measure, these responsibilities were placed in the office of the governor of the Bank of Ghana (the central bank) but nine years later no one has been appointed, leaving the Bank governor as the de facto sole regulator.

The GSE now has 21 listed companies, and measured by market capitalisation is the third-largest stock exchange in Africa, after South Africa and Namibia. How- ever, its capitalisation figure is misleading owing to the dominance by Ashanti Goldfields Corporation (AGC), which accounts for more than 80% of market capitalisation. To iron out potential distortions in measuring the GSE Index, the exchange excludes more than 19m AGC shares listed abroad, and includes only the 3.3m AGC shares tradeable in Ghana, giving the company a weighting of 10%.

The GSE was very small until 1994, when the government divested around 30% of its equity in AGC, and sizeable stakes in six other companies in the same year. The well-publicised AGC divestment stimulated foreign and local

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Manufacturing 23

interest in other Ghanaian equities. (For more details on Ghana’s stockmarket, see Reference table 10.) Despite more (albeit smaller) privatisations in 1995 and 1996, poor economic fundamentals undermined the GSE’s attractions. Dyna- mism returned in 1997, when falling inflation and the government’s post- election efforts to restore fiscal stability tempted some investors back to the GSE. Enthusiasm was maintained during the first quarter of 1998, and the domestic share index rose by over 100% to reach 981 points. However, profit taking and fears that the electricity crisis would damage company performance halted this rise in the second quarter.

Production

Manufacturing

Index of manufacturing production (1977=100) % weighting 1995a 1996a Food products 15.00 99.6 102.5 Beverages 8.11 109.0 116.2 Tobacco & tobacco products 7.75 52.0 53.1 Textiles, wearing apparel & leather goods 13.71 54.8 56.1 Sawmill & wood products 7.22 100.2 105.3 Petroleum products 19.00 101.4 103.5 Iron & steel products 3.25 581.6 584.5 Electrical equipment & appliances 1.34 42.9 53.5 Transport equipment & other products 3.03 – – Overall index 100.00 109.9 115.0

a Provisional.

Source: Ghana Statistical Service, Quarterly Digest of Statistics.

The government faces The Economic Recovery Programme (ERP) has brought mixed results to the difficult decisions manufacturing sector. Falling subsidies and exposure to competition have forced businesses to rationalise and improve performance, but many have also been forced to close down. High interest rates, bank charges and lack of finance have slowed expansion.

Manufacturing growth was sluggish in 1994 and 1995, recording less than 2% growth per year. Since then it has picked up to more than 3% per year, led by a recovery in beverage production.

The government, nevertheless, faces some difficult decisions, in particular on ways it can assist viable or nascent industries at a time of strong global competition. Choices are limited by donor conditionalities, which prohibit subsidies and protectionism. Although it rejects blanket protectionism out of hand, the government has displayed a readiness to support selected nascent industries. In 1994 it set up a C10bn ($10.4m) business assistance fund, financed by privatisation earnings, to aid distressed but potentially viable enterprises and has reduced domestic sales tax on selected items.

Ghana has a broad and For a Sub-Saharan country of its size, Ghana has a broad and diverse industrial diverse industrial base base, covering aluminium smelting, sawmills, timber and agricultural processing plants, brewing, cement manufacture, oil refining, textiles, electricals, pharmaceuticals, mining and many others. The impetus for this came in the years following independence from the government led by Kwame Nkrumah’s Con- vention People’s Party (CPP), which sought to create a self-sufficient Ghana with a diversified industrial base. However, much of the planning and many of the industries were ill-conceived. In subsequent years inappropriate policies starved many viable industries of foreign exchange for spare parts, while keeping unvi- able plants afloat with subsidies and protective policies. By 1982 utilisation of industrial capacity had declined to 21% in medium and large factories.

The positive impact of reforms began showing through after the mid-1980s. Capacity utilisation rates recovered from 35% in 1987 to 40% the following year and 44.5% in 1992 (the latest year for which data are available). Sectors showing the most improvement were textiles, garments, metals, plastics and non-ferrous metal manufactures. (Reference table 11 gives historical manufacturing production statistics.) At the same time, however, Ghana’s industry lobby estimates that at least 120 factories were closed between 1988 and 1992, the garments, leather, electrical, electronics and pharmaceuticals sectors being worst hit.

Mining and semi-processing

Gold dominates the mining sector, which has thrived as a result of a series of astute revisions to Ghana’s mining laws in the late 1980s. Gold is one of Ghana’s two most important sources of foreign exchange, and any change in international prices has a direct bearing on the country’s external accounts. The diamond, manganese and bauxite sectors are recovering after considerable contraction during the economy’s decline in the 1970s. (Reference table 12 provides further information about minerals production.)

Gold reforms have Ghana’s gold reserves lie in Ashanti, which has vast underground resources, quadrupled output and in Western and Central regions, where much alluvial mining takes place. Ashanti Goldfields Corporation (AGC) has long been the country’s largest producer; a series of expansion programmes more than tripled output from 300,000 oz in 1985 to 1.1m oz in the year ending December 1997, including output from AGC’s new foreign acquisitions. AGC was once owned by the government (with a 55% stake) and the UK conglomerate Lonrho (45%) but the ownership structure changed in April 1994 when a portion of its shares was floated on the London and Accra stock exchanges, leaving the government with around 29%. Another sale, in February 1996, reduced its stake to 22%. AGC used to account for 90% of Ghanaian production, but its dominance has been eroded by other mines, which accounted for about 37% of Ghana’s estimated production of about 1.64m oz in 1997.

Other major producers include the Teberebie Mine, Ghanaian Australian Goldfields and Billiton Bogosu. The Tarkwa Mine is expected to become a major producer in the future following modernisation by Goldfields Ghana, which should eventually increase production to 270,000 oz/year.

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Gold output, 1997 (fine oz) AGC 1,039,967 Teberebie 238,804 Ghanaian Australian Goldfields n/a Billiton Bogosu 108,388 Small-scale miners 64,729 Goldfields Ghana 53,771 Barnex (Prestea) 33,483 Bonte 34,839 Total incl others 1,643,378 Source: Ghana Minerals Commission.

Diamonds—a history of Ghana’s diamond reserves lie mainly in the Birim basin. The sector has had an corruption and smuggling unfortunate history characterised not only by corruption and smuggling but also by poor management at the former state-owned Ghana Consolidated Diamonds (GCD). GCD figures suggest that output in 1978 was 1.4m carats, declining steadily to less than 140,000 carats a year by the end of the decade. A reorganisation at GCD, which was taken over by private companies in the early 1990s, has not returned output to the earlier highs. Rather, output has fluctuated significantly in recent years, from around 294,000 carats in 1995 to some 240,000 carats in 1997. Small-scale miners are thought to produce a sizeable amount each year, and local press reports have estimated their output at around 100,000 carats a year. However, extensive illegal mining and a thriving parallel market at Akwatia’s Diamond Junction makes it difficult to measure small-scale output with accuracy.

Ghana is a big exporter of Ghana is one of the world’s largest exporters of manganese. Ghana’s Chamber manganese of Mines estimates that output totalled 455,624 tonnes in 1996, falling back to 436,903 tonnes in 1997.

Bauxite has potential Ghana also has bauxite reserves, but only a small proportion is currently mined, at Bui. Ghana Bauxite Company is the main producer of bauxite, re- porting sales of 518,325 tonnes in 1997. This was a significant improvement on year-earlier sales of 383,370 tonnes. The US Volta Aluminium Company (VALCO) does not process Ghanaian bauxite into alumina, but uses imported raw materials instead.

Agriculture and forestry

Agriculture is critical to Ghana’s economy, accounting for 40-45% of GDP and employing most of the workforce. However, despite its importance and some fundamental reforms of the sector, growth has been sluggish and unpredictable. Output grew by 4.8% in 1991, contracted by 0.6% the following year, and averaged 2.8% per year during 1991-95. Growth registered more than 4% in 1995 and 1996, but it is uncertain whether farmers can sustain the improvement.

To improve the sector’s performance, the government has removed food price controls, raised cocoa prices and boosted extension services. But the results have been disappointing. While farmers are planting more crops, and have

improved cereal yields, overall productivity has declined. The World Bank’s World Development Indicators estimates that agricultural value added per worker fell by around 15% between 1979-81 and 1994-96, to $684.

The low productivity seems to be because of low investment and poor technology, while the removal of subsidies on fertilisers and other agricultural inputs has also had an effect. The World Bank’s report records that Ghana’s fertiliser consumption per ha and cropland under irrigation have halved since 1979. More recent initiatives include increased involvement of the private sector. All crops remain susceptible to changes in weather conditions.

Food crops Maize, cocoyam, cassava and other root vegetables are the main food crops, accounting for 55% of agricultural production. Plantings appear to have risen con- siderably since 1990, when the government ended minimum prices. Cereal plantings (including rice, millet and guinea corn) have risen from 902,000 ha in 1979-81 to around 1.2m ha during 1994-96, and yields rose by 73% over the same period, according to World Development Indicators. The area under starchy staple cultivation has also increased. No records are available for pulses and vegetables. (Reference table 13 gives historical data on the production of selected food crops.)

Cocoa Most cocoa is produced by some 1.6m peasant farmers on plots of less than 3 ha in the forest areas of the Ashanti, Brong-Ahafo, Central, Eastern, Western and Volta regions. In the early 1960s Ghana was the world’s largest producer of cocoa, with an average annual output of 450,000 tonnes, but output fell to an all-time low of 159,000 tonnes in 1983/84. It has since recovered significantly. The 1995/96 crop was the best since the 1960s, at 404,000 tonnes, and after a dip the following year, the 1997/98 season was expected to deliver another bumper crop of some 395,000 tonnes. Between 1991 and 1996 production averaged around 300,000 tonnes.

Higher producer prices, which the government has been steadily increasing since the mid-1980s, were one recovery incentive; another was the provision, by donors, of seedlings to replace trees lost to age and bad weather. The area under cultivation is around 850,000 ha, which the government would like to increase by 100,000 ha by 2000. It would also like to see yields, which are currently 450 kg/ha for the highest-yielding variety, double to the 800-1,000 kg/ha attained in Malaysia. This would require far more fertiliser and insecti- cides, which farmers can barely afford since subsidies were removed as part of the agricultural sector reforms.

In 1992 the government liberalised internal marketing, allowing licensed private traders to buy cocoa domestically at prices competitive to those offered by the state-owned Ghana Cocoa Marketing Board (Cocobod). Private buyers now account for 30% of local purchases. However, this has led to quality-control problems in post-harvest production. The government argues that the reform process should be slowed down until such problems have been solved. The World Bank, however, is keen to press ahead with liberalisation of external marketing.

Forestry More than one-third of the total land area of Ghana is covered by forest, not all of it suitable for commercial exploitation. Commercial forestry, concentrated

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Merchandise trade 27

in Western Region in southern Ghana, was the third-largest foreign-exchange earner in 1995, with revenue of $190m. Since 1983 the industry has undergone substantial changes, supported by aid and commercial credits, which have focused on forestry management, research and equipment for logging, saw- milling and manufacture. The old Ghana Timber Marketing Board has been disbanded and replaced by two bodies: the Timber Export Development Board, which is responsible for marketing and pricing; and the Forest Products’ Inspection Bureau, which monitors contracts and maintains quality standards.

The programme has been successful in raising foreign-exchange earnings but has contributed to the depletion of forest reserves as Ghana’s need to export has increased. Deforestation is estimated to have amounted to 2% of forest cover a year during the 1980s. The government has had to make difficult choices between preservation and the need for hard currency: it banned exports of 18 species of log in 1989 and has since extended the list, but plans to phase out log and lumber exports altogether have been shelved. The current strategy is a package of incentives and penalties to encourage exporters to increase value added. Although there are signs that this has happened recently, lack of funds, managerial skills, technical expertise and marketing facilities remain significant constraints.

The external sector

Merchandise trade

Foreign trade, 1997a ($ m) Exports 1,481.3 of which: gold 563.7 cocoa beans 464.0 timber 164.6 Imports –1,752.9 Non-oil –1,521.6 Oil –231.3 Trade balance –271.6

a Provisional.

Source: Ghana budget, 1998.

Ghana’s trade profile is that of a poor developing country. It has a wide trade deficit and is dependent on a few primary products—gold, cocoa and timber. This dependence is reflected in swings in export earnings according to output of the key commodities and international price fluctuations.

Export volumes are Since 1991 the annual rate of growth in dollar export earnings has averaged recovering— 7.1%, but it has fluctuated within a range of -5.7% and 16.3%. Even so, growth in timber and gold earnings in recent years has made Ghana less susceptible to market or weather conditions in cocoa. In 1997 cocoa accounted for only 31%

of export earnings compared with 53% in 1983. Gold’s share has, meanwhile, risen from around 15% in the mid-1980s to around 40% in 1996. However, falling international prices reduced its share to 38% in 1997, suggesting that cocoa earnings may be higher in 1998. (Reference table 14 gives exports of cocoa, gold and timber in 1992-96.)

Non-traditional exports have also contributed to the diversification effort, growing from $1.9m in 1984 to an estimated $188m in 1997. The main growth sectors include agriculture and agro-processing industries, (particularly fish products and pineapples), processed timber and aluminium products. While the weakening currency favoured non-traditional exports during the first half of this decade, high interest rates and lack of capital have posed constraints. In 1996 and early 1997 the government’s use of the national currency, the cedi, as a nominal anchor against inflation has to some extent undermined growth in non-traditional exports.

—but earnings remain Despite some attempts at price hedging, cocoa and gold both remain vulner- vulnerable to price swings able to commodity price fluctuations. In the mid-1980s cocoa prices reached over $1/lb but bottomed at 45 cents/lb in the second quarter of 1993. They have since recovered, to average 73.4 cents/lb during 1997. Gold prices have similarly experienced a long period of decline over the past two decades, with particularly sharp falls in recent years, and gold is currently trading at just under $300/oz in 1998 from over $490/oz in 1987.

Both mining and cocoa industries have tried to induce price stability: mining companies by means of swaps and options while Cocobod by trading on the futures exchange. So far, AGC, a sophisticated hedger, has been able to iron out fluctuations in gold prices. Cocobod has been less successful, in part because there are fewer hedging opportunities for “soft” commodities.

Import levels are Exchange-rate policy plays a key role in determining import values, as do determined by international price trends for manufactured items. For example, expectations exchange-rate policy that the government would defend the cedi for much of early 1993 led to a rapid build-up in stocks and imports that year and helped cause imports to exceed projections by around $200m. Oil accounts for around 10% of total imports and thus changes in international oil prices tend to have a limited impact on the import bill.

The bulk of Ghana’s trade is with OECD countries (see Reference table 15 for historical data on Ghana’s main trading partners). The main non-OECD trading partners are Nigeria, from which Ghana imports most of its oil, and Togo. The UK has been Ghana’s main supplier for many years, often providing more than 20% of Ghana’s imports, together with Nigeria and the United States. Ghana’s main export markets are the UK, neighbouring Togo, the US and Germany, which takes much of Ghana’s timber. The most notable change over the past decade has been the growth in trade with France, which has striven to extend its influence beyond francophone countries. Imports from France have almost doubled since 1989, while exports to France have more than quadrupled; the rise in imports from France corresponds with increases in French aid.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Invisibles and the current account 29

Main trading partners, 1997a (% of total) Exports to: % of total Imports from: % of total UK 15.7 UK 16.2 Togo 10.8 Nigeria 13.4 US 9.6 US 10.2 Germany 9.0 Germany 5.4

a Derived from partners’ trade data and subject to a wide margin of error.

Source: IMF, Direction of Trade Statistics Yearbook.

Invisibles and the current account

Current account, 1997a ($ m) Merchandise exports fob 1,481.3 Merchandise imports fob –1,752.9 Trade balance –271.6 Services balance –442.8 Net transfers 500.6 Current-account balance –213.8

a Provisional.

Source: Ghana Budget, 1998.

The balance on services and income has traditionally been in deficit. The main outgoings are debt service and insurance and freight services, reflecting the decline of Ghana’s once-illustrious Black Star shipping company. (Balance-of- payments data are given in Reference tables 16 and 17.)

Tourism draws much Like many developing countries, Ghana produces few exportable services, al- investment though recent efforts to revive the tourism sector have paid off to some extent. Ghana’s hotel sector declined dramatically during the 1970s and 1980s but has been rehabilitiated by large-scale private investment. Meanwhile, tourist attractions such as old slave forts and wildlife parks have also seen substantial investment. Tourism officials report some 286,000 arrivals in 1995 but data are unreliable, as the figures cited combine business visitors, Ghanaians resident abroad returning to Ghana and foreign tourists.

Net private transfers have An increase in private transfers in recent years has made a positive contribution increased to the invisibles account. After hovering at around $200m at the turn of the decade, they have increased in recent years to around $290m in 1997. These funds are mainly remittances from Ghanaians working abroad and anecdotal evidence suggest that they are often used to finance small businesses at home.

Official transfers mainly comprise aid grants, which ranged from $306m to $346m between 1992 and 1996. Total net transfers have together totalled around $450m-520m net for most of the past five years.

Capital flows and foreign debt

Aid flows were generous When the Provisional National Defence Council (PNDC) seized power in 1981 during the late 1980s it was clear that large amounts of foreign aid would be required to achieve any significant improvement in the economy, as private lending had dried up.

During the early 1980s Ghana was one of the first Sub-Saharan countries to sustain implementation of a structural adjustment programme. Donors saw Ghana as a test case, and wanted to prove that their policy prescriptions worked. Anxious for a success story to set an example for the rest of Africa, they put more aid per head into Ghana than into most other African countries. Since Ghana’s political transition to democracy in 1992, relations with donors have been mixed. Donors have shown a readiness to suspend disbursements when the government has relaxed fiscal policy or fallen behind schedule on prescribed reforms. In addition, as donors seek to encourage more private-sector involvement in economic development, Ghana will find it more and more difficult to obtain continued inflows although it does still have a large pipeline of undisbursed commitments to use up in the meantime. (See Reference table 19 for data on official development assistance.) Relations with the IMF have also varied. In the 1980s the IMF regarded Ghana as a model client and disbursed more than $775m in adjustment funds. Ghana “graduated” from IMF adjustment borrowing with great fanfare in 1991, but signed up for another deal in 1995. Both sides opted for suspension of the programme in 1996, when it was clear that the government would overspend in the run-up to the 1996 elections. The programme was reactivated in April 1998.

The government has a Since the present government came to power, Ghana’s external debt has quadru- good record on debt pled, from $1.39bn in 1980 to $6.2bn in 1996, according to the World Bank’s service Global Development Finance (see Reference table 18 for further data on external debt). However, the Bank of Ghana (the central bank) reported the debt at $5.35bn for 1996, and at $5.7bn for mid-1997. The differences appear to be a result of different interpretations of short-term debt which the World Bank records as having more than doubled from $320m in 1990 to $705m in 1996. However, the Bank of Ghana contends that it was a more manageable $286m in 1996.

Nevertheless the debt burden, relative to exports, appears to be easing. World Bank data show that the debt to earnings ratio has fallen from a peak of 400% in 1992, to around 349% in 1996. The debt-service ratio, which peaked at 50% of earnings in 1989, has come down to 26.4%. Ghana’s debt service is relatively light because around 63% of obligations have been contracted on concessional terms, with nearly 50% of total debt owed to multilateral creditors.

The National Democratic Congress (NDC) administration improved percep- tions of Ghana’s country risk in the early 1990s, having cleared some debt arrears. This enabled the government to return to the international capital markets in 1991 for loans to prefinance the annual cocoa crop and GNPC’s oil requirements. However, other borrowings (including those of the GNPC) will be kept to a minimum in the near future. In 1996 the IMF and World Bank imposed a moratorium on government non-concessional borrowing and loan guarantees, after the government began borrowing abroad in order to fund vote-winning projects.

EIU Country Profile 1998-99 © The Economist Intelligence Unit Limited 1998 Ghana: Foreign reserves and the exchange rate 31

Direct and portfolio After more than a decade of low and static flows, direct inward investment investment began to pick up in 1993. That year’s inflow, at $125m, was more than five times the annual level in previous years. The following year it almost doubled to $233m and then halved in 1995 again and remained low at $120m in 1996. The fluctuations reflect the erratic levels of investment, particularly in mining sector projects and inflows linked to privatisation.

The data on portfolio flows are conflicting. The IMF’s International Financial Statistics does not show any portfolio investment since the stock exchange opened in 1990. The World Bank’s Global Development Finance also shows no portfolio investment before 1993 but then records a massive $557m in 1994, which was the year that the government divested shares in Ashanti Goldfields Corporation. In contrast to the past few years, where current-account deficits were more than financed by net capital inflows, the overall balance of payments in 1996 recorded a deficit of $20.4m. This deficit was financed by drawing on reserves and by a 13.4% increase in short-term loans and overdraft facilities. The 1998 budget indicates that the overall balance of payments returned to a small surplus of $24.9m in 1997.

Foreign reserves and the exchange rate

Having been kept artificially high for many years, the exchange rate was devalued and floated in stages after 1984. In 1987 the government introduced an auction system, and then in 1990 allowed foreign-exchange bureaux to set up. Since then foreign currency has been easy to acquire for relatively small trans- actions, but the imbalance between supply and demand has caused the cedi to depreciate significantly since 1992 (see Reference table 21 for details of historical exchange-rate data). In 1995 the government began to use the exchange rate as a nominal anchor against inflation. This strategy involved considerable intervention in the foreign-exchange market but slowed the nominal depreciation to 36.6% in 1995 and 21.3% in 1996 (Bank of Ghana figures). This, combined with still high rates of inflation, translated into a sharp appreciation of the real exchange rate. In 1997 the rate of cedi depreciation was faster than inflation, suggesting that the government had abandoned the anchor policy. The cedi lost 23% against the dollar, ending the year at C2,272:$1.

Import cover has fallen The interventions in the foreign-exchange market used up much of Ghana’s hard currency, and left the government thinly stretched when donor inflows slowed in 1997. Foreign-exchange reserves shrank from an estimated $802m in 1996, to only $454m in November 1997. (See Reference table 20 for historical data on foreign reserves.)

Exchange rate and foreign reserves, 1997

Exchange rate C:$ (end-period) 2,272 C:$ (period average) 2,050 Foreign-exchange reserves ($ m) 454 Total reserves excl gold ($ m) 480 Source: IMF, International Financial Statistics.

Appendices

Regional organisations

Economic Community of Ecowas was established in 1975 by the following West African countries: Benin, West African States Burkina Faso, Côte d’Ivoire, The Gambia, Ghana, Guinea-Bissau, Liberia, Mali, (Ecowas) Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. Cape Verde joined in 1977. The principal objective of the community, to be achieved in stages, is the establishment of a customs union and a common market to promote the free movement of goods and people within West Africa. The initial treaty provided for the harmonisation of regional policies in several areas, including agriculture, industry, energy, transport and communications. Ecowas has a small executive secretariat based in the Nigerian capital, Abuja, and six special- ised commissions. Decision-making powers are divided between a Council of Ministers, while supreme authority rests with the annual conference of heads of state and government, who elect a chairman.

Progress towards improved regional economic co-operation and integration has been limited, however, with Ecowas in the 1990s focusing increasingly on political and security issues. Although a number of tariffs have been abolished or reduced under the aegis of Ecowas, in 1994 Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal and Togo, which already have a common currency, the CFA franc, and similar legal codes, set up their own Union économique et monétaire ouest-africaine (UEMOA) to work towards a customs union and other aspects of economic convergence. Guinea-Bissau joined the UEMOA in 1997.

This move reflected the fundamental tension between the largest and most powerful country in the region, Nigeria, and much of francophone West Africa. Since assuming the presidency of Ecowas in 1995, Nigeria has succeeded in persuading member states to pay long overdue subscriptions, while the Nigerian finance minister, Anthony Ani, spoke in 1997 of moving towards a partial convertibility of the naira with the CFA franc, as an essential prereq- uisite for closer regional co-operation. However, in the absence of any formal proposals or a timetable for change, the split between Nigeria, with its anglo- phone allies Ghana, Sierra Leone and Liberia, and their francophone neighbours is likely to remain a major obstacle in the process of economic integration.

The civil wars in Liberia and Sierra Leone since 1989 provided further evidence of both the conflicting alliances within West Africa and the efforts the region has been prepared to make to overcome such tensions. In the case of Liberia, Côte d’Ivoire and Burkina Faso strongly supported the leader of the rebel insurrection, Charles Taylor, whereas Nigeria remained emphatically hostile to his cause. In 1990, under strong pressure from Nigeria’s then military government, regional heads of state abandoned a commitment to non-interference in member states’ internal affairs and agreed to set up an Ecowas Ceasefire Monitoring Group (Ecomog). Ecomog was, however, dominated by contin- gents from Nigeria and quickly became an active player in the conflict. A change of government in Nigeria in 1993 led to a re-evaluation of policy

towards Liberia, and the new head of state, (the now late) General Sani Abacha, dropped his opposition to Mr Taylor and began to work more closely with other countries in the region to bring peace to Liberia.

In 1993 the Ecowas treaty was revised to extend economic and political co- operation between member states, setting as targets the establishment of a single currency and a common market, a regional parliament, an economic and social council and a court of justice. The new treaty formally gave Ecowas responsibility for the prevention and resolution of regional conflicts. The economic objectives remain distinctly ambitious and are highly unlikely to be realised in the short or medium term. At the same time critics have accused Nigeria of using the community’s new political character to mask its own aim of dominating the region’s security environment. Such criticism was strongly voiced following Ecomog’s botched military response to the coup in Sierra Leone in May 1997; the decision to deploy the mainly Nigerian force had been taken by Abacha, apparently without formal Ecowas approval. Six months later Nigeria claimed its actions had been vindicated when all parties to the situation in Sierra Leone agreed to accept an Ecowas plan to restore civilian government.

Communauté économique CEMAC was officially launched in Libreville, Gabon, on February 7th 1998. et monétaire de l’Afrique This follows the harmonisation of external customs tariffs and the abolition on centrale (CEMAC) January 1st of customs duties payable at borders between the six member states—Gabon, Cameroon, Equatorial Guinea, Chad, Central African Republic and Congo (Brazzaville). So far, the economic impact of the change has been less than expected, largely owing to poor transport and communications links. The immediate goals of CEMAC are to:

• form an investment promotion strategy and implement a CEMAC-wide investment code;

• replace turnover tax with value-added tax (VAT), but Gabon is the only country to have done so to date;

• forge a common strategy for promotion of agriculture in the region;

• create a “solidarity fund”, including funding from Western donors, to promote regional integration, particularly in the fields of transport and communications;

• harmonise mining and other legislation between the countries; and

• open a regional stock exchange.

The previously dormant Communauté économique des états de l’Afrique centrale (CEEAC) was relaunched at CEMAC’s inauguration to co-ordinate transport and communications links within the region. The body comprises the six members of CEMAC plus four non-Franc Zone countries: Democratic Republic of Congo (DRC, formerly Zaire), Burundi, Rwanda and São Tomé and Príncipe. Angola has also been invited to join.

Tripartite Commission for Established in May 1996, the Tripartite Commission for East African Co- East African Co-operation operation (EAC) is the successor to the now defunct East African Community. (EAC) Its three members are Kenya, Tanzania and Uganda. Unlike the old East African

Community, which attempted to impose supranational control over all areas of government, the new EAC focuses on the harmonisation of policies. Specifi- cally, when the EAC was formed, the dismantling of borders for the free movement of people, a common travel document and a joint secretariat for railways were envisaged. Other measures to be tackled included the harmonisation of fiscal and monetary policies, and policies on traffic, the environment and security. When progress has been made in some of these areas, the EAC will begin to look at developing a regional economic infrastructure and promoting trade and investment. Significantly, the EAC was not designed to create a common currency and monetary union in the first instance, but to provide a strong alternative to other regional trading organisations such as the Southern African Development Community (SADC) and the Franc Zone.

At their first anniversary meeting in Arusha, Tanzania, in May 1997, the three member states moved closer to establishing an economic and political federation when they adopted a common passport and flag and laid the groundwork for co-operation through a formal treaty. The three presidents issued a commu- niqué in which they highlighted the East African Co-operation Development Strategy for 1997-2000. The document sets out a comprehensive action programme, the aim of which is to foster sustainable and equitable development in the three countries.

Issues yet to be resolved include how the benefits from common investment and services will be shared, and ways of increasing intra-regional trade (which is currently less than $1bn and heavily skewed towards Kenyan exports). Since the co-operation agreement was signed, Kenya, Uganda and Tanzania have tried to harmonise their fiscal and monetary policies; one measure includes a double taxation arrangement. The agreement also provides for joint measures to prevent tax evasion. Other achievements include the convertibility of the currencies of the three states, pre- and post-budget consultations between the finance ministers, synchronisation of the budget day in the three countries, regular consultations between the central banks, and co-operation in capital and securities regulation. In an attempt to promote trade and investment, the East African Business Council has been established, drawing members from national private-sector organisations in the region. Lawyers have also formed their own forum, the East African Law Society.

In infrastructure, the three countries are undertaking joint projects, including a digital transmission system estimated at $69m. The project, which is due to start in mid-1998, is financed by the telecommunications authorities of the three countries, together with the European Investment Bank (EIB) and the East African Development Bank. A regional road network has also been planned, which would be developed jointly, with the assistance of international financiers.

In April 1998 a new treaty is expected to set out the steps to political federation, based on the report from a meeting held in November 1997. The treaty establishing the EAC has shortcomings which can only be corrected by a new treaty. It will confer on the EAC recognition as a legal entity acting in the common interest of member states. Discussions on broadening the membership base, perhaps to include Rwanda, Burundi and, although less likely, the Democratic

Republic of Congo (DRC, formerly Zaire), will also continue, as will discussions among leaders about the relationship of the EAC with the existing but mori- bund Common Market for Eastern and Southern Africa (Comesa) and the thriving SADC.

Common Market for The Common Market for Eastern and Southern Africa (Comesa), which is based Eastern and Southern in Lusaka, Zambia, is the successor organisation to the regional Preferential Africa (Comesa) Trading Area (PTA), and came into force on December 8th 1994 after 12 member states ratified the integration treaty. Comesa is a rival to the Southern African Development Community (SADC) and includes Angola, Burundi, Comoros, Democratic Republic of Congo (DRC, formerly Zaire), Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. South Africa’s decision not to join the organisation, which aims to liberalise trade between the member countries, has given the SADC more leverage. In 1997 Mozambique and Lesotho gave notice that they wanted to leave Comesa to concentrate on their membership of the SADC. Angola’s trade with the Comesa countries is extremely limited.

The PTA, which was launched in 1981, aimed to liberalise trade and encourage co-operation in industry, agriculture, transport and communications, thus lay- ing the foundation for Comesa to push for a regional common market by 2000. The common market is expected to bring about complete freedom of movement of goods, services and capital, and eventually monetary union. At a meeting in Lusaka in April 1997, the Comesa heads of state agreed that a common external tariff structure would be introduced to deal with all third- party trade. The main obstacles to successful integration remain the unclear nature of the relationship with the SADC, most of whose members also belong to Comesa, and the diversity of the member states’ economies.

In general, commitment to the organisation and its financing is rather frail. The administration budget of approximately $4m is heavily dependent on Kenya and Zimbabwe. At the April 1997 meeting members urged each other to concentrate on financing activities, which has resulted in the postponement of sectoral meetings and other activities. The civil strife in Somalia, Sudan, DRC, Rwanda and Burundi has also impeded attempts at regional integration.

The progressive liberalisation of intra-PTA trade began in July 1984, and a multilateral clearing facility, established in Harare, Zimbabwe, began operations in February 1984. A PTA monetary unit of account (UAPTA), then equivalent to the SDR, was used to settle debts between members every two months, the balances being payable in dollars. The 1997 heads of state meeting endorsed a proposal to replace the UAPTA with a Comesa dollar, initially tied to the US dollar.

By 1991 the clearing house was handling 70% of all intra-PTA trade. According to the PTA secretary-general, intra-PTA trade grew at an annual average of over 8% after 1985, reaching a total volume of $1.7bn in 1992. However, intra- Comesa trade still accounts for only about 6% of members’ global trade. The reasons for this small share include the distortions arising from widespread crossborder smuggling, a lack of political commitment and weak balance-of-

payments and foreign reserves positions. While there are hardly any official trade links between many of the member states, a few countries (Kenya, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe) account for 60% of total intra-Comesa trade. In 1996 Kenya alone exported some $900m of goods to other Comesa countries, most of which went to Uganda and Tanzania.

Another constraint has been the strict “rules of origin”, which stipulate that preferential treatment can be granted only to goods produced by companies that are managed by, and 51% of whose equity is held by, nationals of a member state. Kenya and Zimbabwe originally argued strongly against this rule—after years of a sliding-scale arrangement it is once again under review, particular attention being given to value-added provisions. The agreed schedule for removing customs barriers has been frequently revised. The most recent decision—to reduce import duties by 80% for member countries by October 1996—is a case in point. However, only five members have complied fully, and most have consistently failed to meet the timetable for tariff reductions.

A PTA Trade and Development Bank was established in 1986, but only became operational in 1989. Now renamed the East and Southern African Trade and Development Bank, its headquarters have been temporarily relocated from Bujumbura (Burundi) to Nairobi (Kenya). As well as the African Development Bank, 15 Comesa members hold shares in the bank; in December 1995 its total subscribed capital amounted to $82.9m.

Inter-governmental The Inter-governmental Authority on Drought and Development (IGADD), the Authority on brainchild of the president of Djibouti, Hassan Gouled Aptidon, was estab- Development (IGAD) lished in January 1986 with six East African members: Djibouti, Ethiopia, Kenya, Somalia, Sudan and Uganda. Its stated aim was to co-ordinate and channel funding into the alleviation of drought and desertification and into agricultural development. Progress on development and environmental projects was slow but the organisation did make headway as a forum for regional politics, facilitating the successful reconciliation of Somalia and Ethiopia in 1988. Regional events in 1991, however, undermined IGADD: the presidents of Ethiopia and Somalia were overthrown, Eritrea gained independence and the self-proclaimed Somaliland Republic emerged.

Although IGADD was strengthened when Eritrea became the seventh member in September 1993, it achieved little success in helping to resolve internal conflicts in Sudan and Somalia. Thus in March 1996, at a summit in Nairobi, IGADD renamed itself the Inter-governmental Authority on Development (IGAD) and adopted a new charter proclaiming conflict resolution to be its priority. IGAD gained official recognition from the Organisation of African Unity (OAU) as a regional economic organisation in June 1997, and it began to pay more attention to economic integration. However, the resolution of conflicts, both regional and domestic, continues to be seen as a precondition for economic integration, but IGAD’s failure to play a part in resolving the conflict between its own members, Eritrea and Ethiopia, has undermined its regional influence. Nevertheless, developments since 1996 are expected to help IGAD to secure donor aid for long-term development projects.

The Multilateral Monetary The Multilateral Monetary Agreement (MMA) is the most recent in a series of Agreement agreements for formalising the use of the same or parallel currencies among its Southern African members: Lesotho, Namibia, South Africa and Swaziland. The original Rand Monetary Area (RMA) agreement of 1974 also included Botswana, but it opted out two years later to pursue an independent monetary policy and exchange rate. The agreement was renegotiated in 1986 to form the Common Monetary Area (CMA), and then again in 1992 to become the MMA, when Namibia became independent and chose to continue its monetary relationship with South Africa.

Lesotho, Namibia and Swaziland introduced their own national currencies after independence, but their exchange rates remain fixed at parity with the rand. There are no exchange controls between the members. This ensures that the external exchange rate and interest rates are essentially exogenous to the smaller members, being determined in a unified market, the core of which is in South Africa. The rand is legal tender in Namibia and Lesotho, for which South Africa pays compensation. Under the 1992 agreement the rand ceased to be legal tender in Swaziland, opening the possibility of delinking the Swazi lilangeni from the rand. However, in early 1998 all member countries maintained the parity of their currencies with the rand, and foreign-exchange regulations and monetary policy throughout the CMA continued to reflect the influence of the South African Reserve Bank (the central bank).

The Franc Zone Although the Franc Zone evolved in the colonial era, its current form was shaped by treaties signed by its principal members in the early 1970s. The zone governs the credit, foreign-exchange and monetary relations between France and 13 former French colonies in Africa and Equatorial Guinea, as well as between France and its overseas departments and territories, and Monaco.

In November 1972 Cameroon, the Central African Republic, Chad, Congo and Gabon signed an agreement redefining their monetary co-operation. Relations in this field with France were restated in a treaty which was also signed in November. Equatorial Guinea became the sixth African signatory to these accords in 1984. The principal elements of this co-operation are a regional central bank based in Yaoundé (Cameroon), the Banque des états de l’Afrique centrale (BEAC), and a common currency, the CFA (Coopération financière en Afrique centrale) franc. The BEAC is governed by a monetary committee composed of the six Central African states and a joint monetary committee consisting of the six members plus France. A regional customs grouping formed in 1966, the Union douanière des états de l’Afrique centrale (UDEAC), also groups the six states.

A similar chain of events unfolded in francophone West Africa. In November 1973 Côte d’Ivoire, Dahomey (now Benin), Niger, Senegal, Togo and Upper Volta (now Burkina Faso) signed a treaty redefining their monetary co- operation in the Union monétaire ouest-africaine (UMOA), founded in 1962. A convention with France followed in December 1973, and Mali became a party to both agreements in 1984. As with the Central African members of the Franc Zone, the UMOA was based on a common issuing central bank, the Banque centrale des états de l’Afrique de l’ouest (BCEAO, based in Dakar), and a common currency, the CFA (in this case, Communauté financière africaine) franc.

The UMOA became the Union économique et monétaire ouest-africaine (UEMOA) in January 1994. Its council of ministers formulates credit and monetary policies and controls the BCEAO. The council also has responsibility for the regional development bank, the Lomé-based Banque ouest-africaine de développement (BOAD). A seventh country, Guinea-Bissau, joined the UEMOA on March 5th 1997 and became a member of the Franc Zone one month later, on April 17th 1997.

A comparable arrangement exists for Comoros and a convention has been signed with France. The issuing and central bank is the Banque centrale des Comores and the currency is the Comorian franc (Cfr).

The principal features of the Franc Zone are freedom to transfer funds throughout the zone, convertibility of the different currencies and fixed exchange rates. The Banque de France (the French central bank) guarantees the money issued by the regional central banks, which in turn are required to maintain a minimum of 65% of their reserves in French francs with the French Treasury. The much-praised unlimited convertibility of the CFA franc was restricted in August 1993, largely because of massive capital flight, but was restored shortly after a devaluation.

Each regional bank holds an operations account (compte d’opérations), a current account denominated in French francs, with the Treasury in Paris. This is the principal payments mechanism in the zone. Its stability is founded on tight monetary and credit discipline underpinned by two specific safeguard measures: central banks are required to maintain a 20% foreign-exchange cover of their sight liabilities, and governments are not allowed to draw from their regional bank’s central funds more than 20% of the previous year’s budget receipts (although some enterprising governments have found ways to circum- vent this requirement).

In the mid-1980s it was argued that the CFA franc was greatly overvalued, encouraging imports for the urban elite, restraining exports and deterring inward investment. Falling world prices for the zone’s principal exports (oil, coffee, cocoa and cotton) contributed to a sharp fall in the zone’s terms of trade, estimated at 45% in 1985-93 by the French government. Income per head in the zone shrank by about 20% in the same period. These factors, along with French government reservations about funding the budget and current- account deficits of zone members, finally brought major changes. January 1994 saw the first devaluation after 46 years, to CFAfr100:FFr1 (and Cfr75:FFr1). This promptly led to new IMF money for zone members.

The future of the CFA franc and of the zone has been highlighted by the move towards European economic and monetary union. France has pledged to maintain its support for the zone, and it suggests, without confirmation from its EU partners, that the convertibility and parity of the CFA franc will be transferred to a single European currency in due course.

Comité permanent The CILSS was set up in 1973 by eight Sahelian countries of West Africa— inter-états de lutte contre Burkina Faso, Cape Verde, Chad, Guinea-Bissau, Mali, Mauritania, Niger and la sécheresse dans le Sahel Senegal—to co-ordinate the region’s response to the drought emergency at the (CILSS) time. The Gambia joined almost immediately afterwards, bringing the

organisation’s membership to the present nine. There are two CILSS research and training institutes, in Niger and Mali, and the organisation produces statistics on member countries’ food production in association with the Food and Agriculture Organisation of the UN. After several years of financial and organis- ational difficulties, the CILSS was reorganised in 1993-95 and now comprises six major programmes. Peripheral activities have been abandoned and the organisation has become more independent of its member states. The total CILSS budget for 1995 was CFAfr11.7bn ($23m).

The Lomé Convention The Lomé Convention affords a group of 71 African, Caribbean and Pacific (ACP) countries preferential trade and aid links with the EU. At a meeting in Libreville, Gabon, in October 1997 the leaders of the ACP countries prepared a common position for negotiations, beginning in 1998, for a successor agreement to the convention, which expires in 2000. The convention is increasingly at odds with globalisation, and in a test case in 1997 the World Trade Organisation (WTO) ruled that aspects of the EU-ACP arrangements over ba- nana imports were unfair. The ACP leaders meeting in Libreville resolved to concentrate on boosting intra-ACP co-operation, partly through organisations such as the Southern African Development Community (SADC).

The fourth and current convention (Lomé IV) was signed in 1989, replacing the previous agreements signed in Lomé in 1975, 1979 and 1984. Lomé IV maintained the long-term development aims of previous conventions, but placed new emphasis on economic policy reform in member states in line with the general emphasis on “conditionality” among multilateral funding bodies. The terms of Lomé IV hold for ten years, compared with five years previously. A new Financial Protocol was agreed by the EU in 1995 following protracted discussions. The UK and Germany sought to cut contributions and switch to bilateral aid, but France proposed an increase in total funding which was less than the stated requirements of the ACP countries. In the eventual deal, total funding of Ecu14.6bn ($19bn) over five years was agreed, representing a 22% increase on the previous five years.

To achieve the Lomé objectives, a series of instruments was clearly defined in the convention. The most important was the European Development Fund (EDF), with an allocation of Ecu13.3bn under the Financial Protocol. The EDF is the main source of multilateral EU aid to the ACP states, and most of the funding is provided as grants. The remaining Ecu1.3bn was allocated to the European Investment Bank (EIB), which lends on a commercial basis. In addition, the ACP states gained a 16% cut in import tariffs on mainly agricultural products that did not previously enjoy preferential treatment.

The convention offers two other schemes that are separate from the Financial Protocol. The Stabilisation of Export Earnings Scheme (Stabex) was set up to cover losses of earnings caused by a fall in prices or a decline in production of the main ACP agricultural exports. A total of 49 products are on the Stabex list. Funding allocated to Stabex was increased by 62% to Ecu1.5bn under Lomé IV. Sysmin, a special financing facility for countries reliant on the export of minerals, was increased by 16% to Ecu480m. The schemes, however, suffer from a shortage of funds.

Negotiations between the EU and the ACP countries on renewing the convention are expected to start before the end of 1998. Most ACP countries are in favour of maintaining the status quo, but the EU is seeking to reform the convention, which has failed to bring about the intended growth in trade. The EU is expected to lay greater emphasis on regional integration in ACP countries, and by seeking separate sub-agreements within the Lomé Convention to take into account not only regional but also economic differences. The EU is also expected to phase out preferential trade arrangements, which have come under increasing attack from the WTO.

Southern African In August 1992 Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Development Community Swaziland, Tanzania, Zambia and Zimbabwe signed a treaty establishing the (SADC) Southern African Development Community (SADC). SADC replaced the Southern African Development Co-ordination Conference (SADCC), which was formed in 1980 by the Southern African states in a largely unsuccessful attempt to reduce the region’s economic dependence on white-ruled South Africa; Namibia joined SADCC shortly after independence in 1990. Mauritius became the 12th member in August 1995, and in 1997 Democratic Republic of Congo (DRC, formerly Zaire) and Seychelles became members.

SADC inherited SADCC’s secretariat, based in Gaborone, Botswana, and the responsibilities of each member for co-ordinating a different policy sector have remained broadly unchanged. Post-apartheid South Africa formally joined the organisation on August 29th 1994 following its first multiracial elections. The end of apartheid in South Africa has inevitably shifted some of SADC’s political and economic emphasis, although its goals remain broadly the same as those of SADCC: boosting Southern Africa’s general economic independence, building regional integration and trade, and mobilising support for national and regional projects. In mid-1994 (shortly before South Africa joined SADC) only 4% of members’ trade was within the community, while 25% was with South Africa. This pattern has not changed a great deal since then, despite South Africa’s membership.

In August 1996 the presidents of the SADC countries (with the exception of Angola) signed a protocol to create a regional free-trade area by progressively reducing and ultimately removing all import tariffs between member states over a period of eight to ten years. Implementation of the plan has been complicated by pre-existing subregional trade groupings, such as the Southern African Customs Union (SACU), and the reluctance of individual countries to open vulnerable sectors to competition. However, important progress was made in 1997 when all members agreed to ratify a trade protocol which provides for the phased reduction and ultimate elimination of tariffs on goods originating in member states. South Africa, which has by far the largest economy in the region, has agreed to reduce its tariffs over an eight-year period; the other members have been given a ten-year period.

A total of 90% of SADC’s funding for sectoral projects is from foreign sources. International support for the community should continue to be solid, although donors warned in early 1995 that members should not expect to rely on continual handouts. At present SADC members contribute equally to the annual budget of $12.5m.

SADC members aim to increase their access to European markets and secure stable commodity prices under the Lomé Convention, or its replacement. At the same time the EU and South Africa are in negotiation over establishing a free-trade area between them. Many other SADC countries, particularly members of SACU, feel threatened by such an arrangement and fear that they could be flooded by cheap European imports if the plan goes ahead. Negotiations between the EU and South Africa have run into difficulties over the timetable for phasing out tariffs, but an agreement is expected by the end of 1998.

SADC is consolidating its co-operation on non-trade issues, and intra-SADC agreements in areas such as mining, establishing a landmine-free zone and drug-trafficking are proceeding.

Southern African Customs SACU is a customs union linking Botswana, Lesotho, Namibia, Swaziland (the Union (SACU) “BLNS” states) and South Africa (Namibia was treated as a member before independence by virtue of its relationship with South Africa). SACU is the oldest and most formal regional economic grouping in Southern Africa, dating back to 1910. The customs union, administered by South Africa, gathers excise duties on local production and customs duties on member states’ imports from outside the SACU area. Imports are subject to very high tariffs—more than 100% in some cases—which protect industries within the union, particularly in South Africa. The BLNS states depend on South Africa for most of their imports and, more crucially, on the privileged access to the South African market which their goods enjoy.

A revenue-sharing formula continues to govern the allocation of collected duties to each member country. The governments of Lesotho and Swaziland, in particular, depend heavily on their shares of redistributed SACU receipts for their budgetary revenue. Negotiations to phase out the SACU agreement in favour of a wider free-trade arrangement to incorporate the Southern African Development Community (SADC) have stalled because of the fears of some BLNS countries that they will lose crucial revenue, as well as privileged access to the South African market, and because they fear that a bilateral agreement between the EU and South Africa could flood the market with cheaper imports and affect the competitiveness of their own goods. Production patterns in these four countries have been determined in part by access to the South African market and the widening of a free-trade agreement to include all SADC countries could harm their productive sectors. Both SADC and the EU have assured the BLNS countries that sensitive products will be ringfenced under special protocols, and that local sensitivities will be taken into consideration when tariffs are phased out.

Organisation of African The OAU was founded in 1963 by 30 African nations to promote solidarity and Unity (OAU) higher living standards, to defend the sovereignty of member states and to eliminate colonialism. Another 21 signatories have since joined, the last of which was South Africa in 1994. Morocco left in 1985. The OAU is committed to creating an Africa-wide customs union and to removing tariff and non-tariff barriers by 2004. The organisation has been criticised as being just a talking shop, and has been hampered for years by severe budgetary problems.

The foreign affairs ministers of member states meet twice a year to discuss the implementation of the organisation’s accords. The issues raised are dealt with at the annual assembly of heads of state, which meets in June or July. The annual conference is hosted by the member state that is due to take over the chairmanship of the organisation for the next year. The 1997 conference took place in Harare, where the Zimbabwean president, Robert Mugabe, took over from Paul Biya of Cameroon, although Mr Biya did not attend the conference. There have, in addition, been three extraordinary conferences of heads of state: the first was in 1970 to discuss the Angolan crisis; the second, in 1980, sought to address the continent’s economic problems; and the third, in 1990, attempted to address the problem of African debt.

The OAU is committed to the creation of an African Economic Community (AEC) according to the Lagos Plan of Action drawn up in 1980. This was originally scheduled to be in place by 2000, but at the 27th summit of heads of state in Abuja, Nigeria, in June 1991 this target was postponed to 2025. The AEC treaty, signed at the summit, outlined six stages, including the removal of tariff and non-tariff barriers to trade and the establishment of a continent-wide customs union by 2004. A commitment was also made to the establishment of an African Common Market (ACM), with a central bank and single currency, by 2031.

The problem of conflict resolution has come to dominate the annual summit of heads of state. At the 1992 summit the OAU was criticised for never having successfully resolved a conflict in any of its member states. The possibility of the establishment of a military force to observe and monitor ceasefires negoti- ated by the OAU has been raised by several heads of state but no formal commitment has been made. The issue has been particularly pressing in the wake of renewed ethnic violence in Burundi in 1996, but the OAU again stopped short of agreeing to establish a military force, although it did sponsor peace talks between Burundian factions in Addis Ababa, Ethiopia.

Any move to step up the activity of the OAU is hampered by the organisation’s severe budgetary problems. In November 1995 the ten worst debtors, owing $16.5m between them, were debarred from speaking or voting at any OAU meeting. The return of full rights is conditional upon their paying a large part of their arrears. By the time of the 1997 summit, although the organisation’s finances were in better shape than they had ever been, membership arrears still totalled $53m. The OAU’s budget for fiscal year 1997/98 was set at $64m.

The OAU remains a high-profile talking shop. Little real action results from its policy decisions, constrained as it is by limited funds and the varying levels of commitment of its members.

Sources of information

National statistical sources In the 1980s Ghana’s statistical data were plentiful by regional standards. How- ever, Ghana has recently fallen behind other African countries where there have been aid-financed improvements in data gathering and formulation. The most obvious example is the government’s tardiness in submitting data to the IMF’s International Financial Statistics.

Shortage of expertise and trained personnel and lack of money mean that many of the statistics are out of date. The Quarterly Digest of Statistics (published by the Ghana Statistical Service), the main source for all important national data, is patchy. While some of the data in the 100-plus tables in the June 1994 edition, still the latest comprehensive source available even in mid-1998, cover to the end of 1993, some of the trade statistics cover only to 1989. However, there have been some improvements, particularly in the agricultural output sections, which are now more up-to-date.

The Bank of Ghana’s Quarterly Economic Bulletin is the main source of information about money supply and bank and exchange rates. The Central Statistical Office also provides reasonably up-to-date information about inflation. The Ghana Stock Exchange reviews its operations in its annual Fact Book.

The Accra-based independent think-tank, CEPA, provides a comprehensive analysis of recent macroeconomic trends in its annual Macroeconomic Review and Outlook; data are drawn from local sources and from CEPA’s own estimates.

Further data are contained in the Budget speeches issued by the Ministry of Finance, Accra.

International statistical Apart from these key sources, most of the rest of the data are derived from the sources World Bank and the IMF, which in turn rely on the government to furnish the data. This applies to both to International Financial Statistics and the World Bank’s Global Development Finance (formerly World Debt Tables). There are generally few inconsistencies between data in these sources and the Quarterly Economic Bulletin.

Otherwise, use is made of the World Bank’s own data for information about subjects it has researched extensively while preparing for project lending. The best information on the financial sector, including “informal savings”, exists in the December 1994 Financial Sector Review, Bringing Savers and Investors Together. The Bank’s Country Economic Memorandum, published in collaboration with the government of Ghana in May 1995, provides a broader view of the macroeconomic issues, under the title Ghana: Growth, Private Sector and Poverty Reduction. More useful data are included in the World Bank’s Technical Paper, Supply and Demand for Finance for Small Enterprises in Ghana. For more general information on social and economic development, see the World Bank’s Social Indicators of Development and Trends in Developing Economies.

For information on international aid, see the OECD’s Geographical Direction of Financial Flows to Aid Recipients.

Select bibliography J Herbst, The Politics of Reform in Ghana, 1982-91, California University Press, 1993

D Rimmer, Staying poor: Ghana’s political economy, 1950-90, Oxford, 1993

P Nugent, Big men, small boys and politics in Ghana, 1994

Reference tables

Reference table 1 Government finances (C m) 1993 1994 1995 1996 1997 Total revenuea 664.4 1,261.0 1,784.8 2,219.0 2,616.0 Tax 516.1 826.4 1,138.7 1,710.5 2,069.0 Non-tax 112.4 395.4 552.3 287.5 376.7.0 Grants 35.9 39.2 93.8 78.0 66.6 Total expenditure –760.9 –1,150.0 –1,714.5 –2,555.0 2,914.0 Current 615.7 975.7 1,271.4 1,861.0 2,290.0 Capital 145.2 174.3 443.1 682.0 539.0 Overall balance –96.5 112.0 70.3 –335.0 –297.0 Financing 96.5 –112.0 –70.3 335.0 297.0 of which: external 56.4 –85.0 –42.6 –195.0 –430.0

a Including divestitures.

Sources: Ghana Statistical Service, Quarterly Digest of Statistics; Ghana Budget 1998.

Reference table 2 Money supply (C bn unless otherwise indicated; year-end) 1993 1994 1995 1996 1997 Money (M1) 461.35 693.55 925.29 1,215.72 1,724.06 Quasi-money 203.32 275.16 434.38 586.89 815.87 Money (M2) 664.67 968.71 1,359.67 1,802.61 2,539.93 M2 growth (%) 26.3 45.7 40.4 32.6 40.1 Source: IMF, International Financial Statistics.

Reference table 3 Interest rates (%; year-end) 1993 1994 1995 1996 1997 Central Bank rate 35.0 33.0 45.0 45.0 45.0 Treasury bills 30.95 27.2 35.4 41.6 42.8 Commercial bank deposits 23.63 23.15 28.73 34.54 35.76 Commercial bank lending Agriculture 24.0-39.0 22.5-35.0 28.0-47.0 30.0-47.0 n/a Export trade 23.0-39.0 20.3-35.5 34.3-47.0 30.0-47.0 n/a Manufacturing 26.0-39.0 26.0-35.5 33.0-47.0 39.0-47.0 n/a Sources: Bank of Ghana, Quarterly Economic Bulletin; IMF, International Financial Statistics.

Reference table 4 Gross domestic product (% change year on year in brackets) 1992 1993 1994 1995 1996 GDP at current prices (C bn) 2,803 3,675 4,950 7,418 10,633 (15.5) (31.1) (34.7) (49.9) (43.3) GDP at constant (1975) prices (C m) 7,495 7,848 8,168 8,535 8,970 (3.9) (5.0) (3.8) (4.5) (5.2) GDP per head at current prices (C ’000) 176 233 292 424 590 (6.0) (32.3) (25.3) (45.2) (39.1) GDP per head at constant (1975) prices (C) 470 478 482 488 498 (1.0) (1.9) (0.7) (1.4) (2.1) Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Staff Country Report 1998.

Reference table 5 Gross domestic product by expenditure (C m; at constant 1975 prices; % change year on year in brackets) 1992 1993 1994 1995 1996 Private consumption 5,995 6,244 6,332 6,443 6,714 (5.0) (4.1) (1.4) (17.5) (4.2) Central government consumption 1,242 1,432 1,470 1,482 1,496 (11.8) (11.7) (–15.1) (15.1) (0.9) Gross fixed investment 1,089 1,318 1,402 1,434 1,453 (8.9) (21.0) (6.4) (2.3) (2.3) Change in stocks 33333 Gross domestic expenditurea 8,328 8,976 9,207 9,362 9,666 Exports of goods & services 1,347 1,390 1,463 1,610 1,782 (6.4) (3.2) (5.2) (10.0) (10.7) Imports of goods & services 2,179 2,498 2,501 2,437 2,473 (14.0) (14.6) (0.0) (–2.5) (1.5) GDP at market prices 7,495 7,867 8,168 8,535 8,976 Factor income paid abroad –139 –129 –135 –149 –155 GNP 7,356 7,738 8,034 8,386 8,821 a Totals do not add in source.

Sources: Ghana Statistical Service; IMF, Staff Country Report 1998.

Reference table 6 Gross domestic product by sector (C m; at constant 1975 prices; % change year on year in brackets) 1992 1993 1994 1995 1996 Agriculture 3,195 3,269 3,358 3,500 3,691 (-1.2) (2.3) (2.7) (4.2) (5.5) Industry 1,096 1,155 1,187 1,227 1,275 (6.2) (5.4) (2.8) (3.3) (3.9) Mining & quarrying 107 116 122 129 134 Manufacturing 657 684 694 706 725 Electricity & water 110 119 125 133 141 Construction 222 236 246 259 275 Services 3,392 3,634 3,817 4,004 4,209 (8.2) (7.2) (5.0) (4.9) (5.1) of which: wholesale & retail trade, restaurants & hotels 1,157 1,252 1,320 1,406 1,523 finance, insurance, real estate & business services 706 748 778 801 835 GDP at factor costa 7,495 7,868 8,168 8,535 8,976 a Totals do not add in source.

Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Staff Country Report 1998.

Reference table 7 Price indices (% change year on year in brackets) 1993 1994 1995 1996 1997 Consumer prices (1990=100) 162.3 202.7 353.4 473.7 605.8 (24.9) (24.9) (74.3) (34.0) (27.8) Food price indexa (1990=100) 150.2 188.9 302.6 365.5 n/a (24.9) (25.8) (60.2) (20.8) (n/a) a Food prices have a weighting of 492 out of 1,000 in the consumer price index.

Sources: IMF, International Financial Statistics; Ghana Statistical Service, Statistical Newsletter; IMF, Staff Country Report 1998.

Reference table 8 Population and labour force

1993 1994 1995 1996 Population (m; mid-year) 16.20 16.64 17.08 17.5 Population growth (%) 2.8 2.7 2.6 2.6 Labour force (m) 7.33 7.53 7.74 8.00 Sources: World Bank, Social Development Indicators; World Development Indicators.

Reference table 9 Transport statistics

1992 1993 1994 1995 1996 Railways Passenger traffic (m km) 135.1 117.7 n/a n/a n/a Goods traffic (m km) 108.6 137.1 n/a n/a n/a Roads New registrations of motor vehicles 15,262 n/a n/a n/a n/a Ports (’000 tonnes) Tema 3,910 4,130 4,090 4,611 4,890 Loaded 791 601 629 681 690 Unloaded 3,119 3,529 3,461 3,930 4,200 Takoradi 1,802 2,123 2,315 1,857 1,795 Unloaded 702 722 811 657 755 Loaded 1,100 1,401 1,504 1,200 1,040 Sources: Ghana Statistical Service, Quarterly Digest of Statistics; Ghana Ports and Harbours Authority.

Reference table 10 Stockmarket indicators (end-period unless otherwise indicated) 1993 1994 1995 1996 1997 No. of listed companies 15 17 19 21 21 Market capitalisation C bn 96.5 1,968.4 2,399.0 2,597.2 2,552.8 $ m 118.4 1,872.9 1,648.8 1,492.5 1,137.8 Volume of trading (m shares) 37.94 93.04 55.84 35.75 166.93 Value of trading (period total) C m 3,177.9 73,088.2 27,590.6 27,785.0 95,839.0 $ m 4.8 75.1 22.3 17.0 46.7 Local indexa 170.8 371.7 298.1 360.8 511.7 % change 115.9 117.6 –19.8 21.0 41.8 a GSE all-share index.

Sources: IFC, Annual Emerging Stockmarket Fact Book; Ghana Stock Exchange, Fact Book 1996; CDH Group, Monthly Review.

Reference table 11 Manufacturing production (volume indices unless otherwise indicated; 1977=100) % weighting 1992 1993 1994 1995 1996 Food manufacturing 15.0 62.8 90.3 90.8 99.6 102.5 Beverages 8.1 112.2 105.5 109.4 109.0 116.2 Tobacco & tobacco products 7.8 47.1 52.2 53.0 52.0 53.1 Textiles & clothing 13.7 23.7 60.2 48.0 54.8 56.1 Timber 7.2 120.2 91.9 98.2 100.2 105.3 Paper & printing 1.9 54.6 33.7 47.1 45.1 49.3 Petroleum refining 19.0 65.0 65.8 94.4 101.4 103.5 Chemicals 6.6 56.7 38.4 129.8 140.0 148.2 Cement 3.0 177.0 206.2 217.0 258.1 258.9 Iron & steel 3.3 356.0 392.8 541.7 581.6 584.5 Non-ferrous metal 9.6 115.8 109.9 88.8 119.8 125.6 Cutlery & metal products 0.5 83.3 99.9 124.0 102.4 116.4 Electrical goods & appliances 1.3 46.3 52.6 29.8 42.9 53.5 Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Country Report 1998.

Reference table 12 Minerals production (’000 tonnes unless otherwise indicated) 1992 1993 1994 1995 1996 Gold (’000 kg) 31.4 38.6 43.3 51.3 48.3 Bauxite 498.1 482.5 426.1 513.0 413.2 Manganese 477.7 361.7 269.7 100.0 447.9 Diamonds (’000 carats) 584.5 616.0 426.1 422.7 714.3 Sources: Ghana Statistical Service, Quarterly Digest of Statistics; IMF, Country Report 1998.

Reference table 13 Production of selected food crops (’000 tonnes) 1992 1993 1994 1995 1996 Cereals 1,255 1,644 1,663 1,805 1,756 maize 731 961 939 1,034 1,008 rice 132 157 162 202 202 millet 133 198 168 209 193 guinea corn 259 328 394 360 353 Starchy staples 10,277 11,250 10,348 11,756 12,761 cassava 5,662 5,972 6,025 6,611 7,111 cocoyam 1,202 1,236 1,148 1,383 1,552 yam 2,331 2,720 1,700 2,126 2,275 plantain 1,082 1,322 1,475 1,636 1,823 Sources: Ghana Statistical Service, Quarterly Digest of Statistics; FAO, Production Yearbook; IMF, Staff Country Report 1998.

Reference table 14 Exports (’000 tonnes unless otherwise indicated) 1992 1993 1994 1995 1996 Cocoa beans 223.8 263.7 238.3 236.3 317.6 Cocoa products 19.3 22.8 14.0 13.9 11.4 Gold (’000 fine oz) 995.4 1,210.5 1,435.4 1,689.5 1,485.0 Timber (’000 cu metres) 406.7 727.8 780.0 590.0 n/a Sources: Bank of Ghana, Quarterly Economic Bulletin; based on recorded receipts.

Reference table 15 Main trading partners ($ m) 1992 1993 1994 1995 1996 Exports fob to: 1,237 1,133 1,474 1,602 1,704 UK 119 98 193 235 268 Togo 90 107 127 157 185 US 32 199 187 184 163 Germany 80 178 219 192 154 France 20 58 86 125 127 Côte d’Ivoire 67 3385 EU 375 520 799 856 905 Africa 208 163 188 235 269 Imports fob from: 2,139 2,056 2,058 2,564 3,188 UK 1,368 356 322 416 518 Nigeria 305 333 346 388 426 US 219 236 137 173 325 Germany 192 117 114 193 171 Japan 142 82 138 102 108 Netherlands 69 91 84 128 97 EU 932 853 882 1,105 1,395 Africa 405 447 491 607 702 Source: IMF, Directory of Trade Statistics Yearbook.

Reference table 16 Balance of payments, IMF estimates ($ m) 1992 1993 1994 1995 1996 Goods: exports fob 986.3 1,063.6 1,237.7 1,431.2 1,571.0 Goods: imports fob –1,456.7 –1,728.0 –1,579.9 –1687.8 –1,937.0 Trade balance –470.2 –664.4 –342.2 –256.6 –366.0 Services: credit 118.4 144.7 147.5 150.6 156.8 Services: debit –389.3 –445.3 –420.8 –432.6 –456.4 Income: credit 10.5 11.6 11.8 13.7 23.5 Income: debit –116.7 –123.9 –122.7 –142.9 –163.4 Net transfers 470.3 517.5 471.8 523.2 481.7 Current-account balance –377.0 –559.8 –254.6 –144.6 –323.8 Net direct investment 22.5 125.0 233.0 106.5 120.0 Net portfolio investment 0.0 0.0 0.0 0.0 0.0 Net other investment 253.4 517.6 248.7 355.6 165.1 Financial balance 275.9 642.9 481.7 462.1 285.1 Financing (- indicates inflow) Movement of reserves 122.8 –53.3 –172.1 –256.5 20.4 Source: IMF, International Financial Statistics.

Reference table 17 Balance of payments, national estimates ($ m) 1993 1994 1995 1996 1997 Merchandise exports 1,063.6 1,237.7 1,431.2 1,571.0 1,481.3 Merchandise imports –1,728.0 –1,579.9 –1,687.8 –1,937.0 –1,752.9 Trade balance –664.4 –342.2 –256.6 –366.0 –271.6 Services (net) –412.0 –383.5 –410.3 –438.6 –442.8 Private transfers (net) 261.2 271.0 263.2 276.1 290.0 Official transfers (net) 256.2 200.8 260.0 205.6 210.0 Current-account balance –559.0 –253.9 –143.7 –322.9 –213.8 Capital inflows Official long- & medium-term (net) 370.2 295.3 135.5 351.2 264.8 Private long- & medium-term (net) 106.3 205.8 261.2 70.0 55.4 Short-term (net) 153.6 –22.3 62.4 –135.7 –81.5 Capital-account balance 630.1 478.8 459.1 285.5 238.7 Errors & omissions –112.2 –61.1 –66.3 18.5 –0.4 Overall balance –41.1 163.8 249.1 –18.9 24.7 Sources: CEPA, Macroeconomic Review and Outlook; Ghana budget speech.

Reference table 18 External debt, World Bank estimates ($ m unless otherwise indicated) 1992 1993 1994 1995 1996 Total external debt 4,499 4,880 5,464 5,872 6,202 Long-term debt 3,345 3,666 4,180 4,598 4,955 Short-term debt 414 476 583 625 705 of which: interest arrears on long-term debt 41 56 60 32 62 Use of IMF credit 740 738 700 649 543 Public & publicly guaranteed long-term debt 3,310 3,629 4,148 4,571 4,684 Official creditors 3,013 3,321 3,761 4,113 4,236 Multilateral 2,200 2,404 2,700 2,971 3,118 Bilateral 813 916 1,061 1,142 1,118 Private creditors 297 308 387 458 448 of which: bonds 00000 banks 5 5 36 119 182 Total debt service 319 306 366 398 471 Principal 198 186 247 301 323 Interest 121 120 119 96 148 Ratios (%) Total external debt/GNP 71.3 87.9 107.9 97.1 100.0 Debt service/exports of goods & services 28.4 24.9 25.9 24.6 26.4 Short-term debt/total external debt 9.2 9.7 10.7 10.7 11.4 Concessional long-term debt/total external debt 57.2 59.3 61.2 63.4 63.0

Note. Long-term debt is defined as having original maturity of more than one year.

Source: World Bank, Global Development Finance.

Reference table 19 Net official development assistancea ($ m) 1992 1993 1994 1995 1996 Bilateral 333.7 312.4 331.8 358.6 348.9 of which: Japan 71.3 83.1 134.8 122.1 110.0 US 27.0 46.0 53.0 54.0 30.0 Germany 24.0 51.2 23.9 43.7 37.1 UK 55.5 36.9 28.9 20.9 33.6 Multilateral 284.5 310.2 220.5 300.9 307.1 of which: IDA 167.6 201.5 171.8 234.3 233.7 EU 62.1 60.9 42.4 53.8 73.7 IMF 0 –11.5 –43.7 –46.1 –61.0 Arab countries –4.3 –4.4 –5.9 –6.2 –2.4 Total incl others 612.9 618.2 546.4 653.3 653.6 of which: grants 320.4 320.4 306.5 346.5 315.3

a Disbursements minus repayments. Official development assistance is defined as grants and loans with a grant element of at least 25%, provided by OECD and OPEC countries with the aim of promoting development and welfare in the recipient country.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.

Reference table 20 Foreign reserves ($ m; end-period) 1993 1994 1995 1996 1997 Foreign exchange 385.3 554.3 669.2 801.5 453.6 SDRs 0.5 4.2 2.4 2.2 3.1 Reserve position in the IMF 23.9 25.4 25.8 25.0 23.7 Total reserves excl gold 409.7 583.9 697.5 828.7 480.4 Source: IMF, International Financial Statistics.

Reference table 21 Exchange rates (C per unit of currency; period averages) 1993 1994 1995 1996 1997 $ 649.1 956.7 1,200.4 1,637.2 2,050.0 SDR 1,125.9 1,536.7 2,154.3 2,522.7 3,066.5 £ 968.7 1,465.3 1,894.9 2,556.8 3673.4 DM 390.8 589.5 837.6 1,088.0 1293.5 FFr 112.7 172.3 240.5 320.0 384.4 ¥ 5.9 9.4 12.8 15.0 18.6 CFAfr 2.3 1.7 2.4 3.2 3.8 Naira 29.4 43.5 54.8 74.8 102.5 Source: IMF, International Financial Statistics.

Editor: Piers Haben All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023