Country Report 3Rd Quarter 1999 © the Economist Intelligence Unit Limited 1999

COUNTRY REPORT

Ghana

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3rd quarter 1999

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Contents

3 Summary

4 Political structure

5 Economic structure

6 Outlook for 1999-2000

11 Review 11 The political scene 14 Economic policy 16 The economy 18 Agriculture 20 Mining and industry 23 Energy 23 Health 24 Finance 25 Foreign trade, aid and payments

28 Quarterly indicators and trade data

List of tables

9 Forecast summary (domestic) 10 Forecast summary (external) 15 Ghana’s domestic payment arrears 17 Inflation 18 FDI inflows into Africa 19 Domestic cocoa processing 20 Gold output by major producers 21 Ashanti Goldfields Company: production and results 23 Diamond output 24 HIV/AIDS in Africa: comparative estimates 25 Ghana Stock Exchange: selected shares 26 Ghana’s trade with the US 28 Quarterly indicators of economic activity 29 Foreign trade 30 Direction of trade

List of figures

10 Gross domestic product 10 Real exchange rates 16 Population 18 Cocoa prices 20 Gold prices

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 . Ghana 3

August 16th 1999 Summary

3rd quarter 1999

Outlook for 1999-2000: Calls for a truth and reconciliation commission will haunt the ruling NDC and could influence the nomination for President Rawlings’s successor. The 2000 elections will be close but the NDC will hold on to power. Ethnicity is not expected to be an election issue, but growing labour unrest may pose some problems for the authorities. Higher government spending is expected to lead to an increase in the fiscal deficit. GDP growth is forecast at 5% in 1999 and 5.5% in 2000, and annual average inflation will rise to 14% in 1999 and 15% in 2000. Falling world prices for gold and cocoa will lead to a decline in export earnings, widening the current-account deficit to $285m in 1999 and $360m in 2000. The cedi will depreciate further this year but will remain stable in real terms in 2000.

The political scene: The 20th anniversary of the coup that brought President Rawlings to power has rekindled memories of those who suffered. Rivalry between the main political parties has intensified. The NRP has been officially registered and promptly accused the NDC of harassment, while the CP remains in disarray. National roadblocks have been established in an attempt to cut crime. Students have threatened to protest as labour unrest continues to rise.

Economic policy: The World Bank has provided support for economic reforms, focusing on privatisation. VAT revenue has been on target, but the government’s payment arrears have remained a cause for concern. An export zone has been launched and a census is expected to be conducted next year.

The economy: The government’s GDP figures have come under some scru- tiny. Inflation has fallen into single digits but interest rates remain high. The currency has started to decline. FDI inflows increased between 1993 and 1997.

Sectoral trends: Low cocoa prices could lead to co-operation with Côte d’Ivoire. Ghana is keeping producer prices high, which has led to an increase in smuggling. Cocoa processing has suffered from the 1998 electricity crisis. Gold production rose by 40% in 1998. Labour strife has reduced production at AGC. Diamond production rose by 200% in 1998. The regional gas pipeline project may be cancelled. Fertility rates have been declining, while a UN report shows a low incidence of HIV.

Finance: A stock broker has been expelled from the GSE and the stockmarket has continued to slump.

Foreign aid, trade and payments: Trade with the US fell in 1998 but timber exports rose. Fish exports also increased, despite a ban by the EU which has now been lifted.

Editor: Piers Haben All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in November

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 4 Ghana

Political structure

Official name Republic of Ghana

Form of state Unitary republic

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

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

National elections December 7th 1996 (presidential and legislative); next elections due in 2000

Head of state President, elected by universal suffrage for a maximum of two four-year terms; currently Jerry John Rawlings, serving a second term

National government Cabinet, partially appointed by the president in February-May 1997; last major reshuffle in January 1998

Main political parties Progressive Alliance (PA), the ruling coalition, consisting of the National Democratic Congress (NDC, the majority party) and the Every Ghanaian Living Everywhere (EGLE) party. Opposition parties include: the New Patriotic Party (NPP); the People’s National Convention (PNC); the Convention Party (CP); the People’s Convention Party (PCP); United Ghana Movement (UGM). The National Reform Party was formed in July 1999 by a breakaway faction of the NDC

President Jerry John Rawlings Vice-president John Atta Mills

Key ministers Agriculture Joseph Owusu-Acheampong Attorney-general & justice Obed Asamoah Communications John Mahama Defence E K T Donkoh Education Ekwow Spio-Garbrah Employment & social welfare Mohammed Mumuni Environment, science & technology Cletus Avoka Finance Richard Kwame Peprah Food & agriculture Kwabena Adjei Foreign affairs Victor Gbeho Health Samuel Nuamah-Donkor Interior Nii Okaidja Adamafio Lands & forestry Christine Amoako-Nuamah Local government Kwamena Ahwoi Mines & energy Fred Ohene Kena Parliamentary affairs Kwabena Adjei Roads & transport Edward Salia Tourism Mike Gizo Trade & industries John Frank Abu Works & housing Issac Adjei-Mensah Youth & sports Enoch Teye Mensah

Central bank governor Kwabena Duffour

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Ghana 5

Economic structure

Latest available figures

Economic indicators 1994 1995 1996 1997 1998a GDP at market prices (C bn) 4,950 7,418 10,385 14,113 17,200 Real GDP growth (%) 3.6 4.5 5.2 5.1 4.6b Consumer price inflation (av; %) 24.9 74.3 34.0 27.9 19.4c Population (m) 16.86 17.34 17.83 18.34 18.75 Exports fobd ($ m) 1,238 1,431 1,571 1,490 1,820 Imports fobd ($ m) 1,580 1,678 1,937 2,128 2,098 Current-account balance ($ m) –255 –145 –324 –541 –255 Reserves excl gold ($ m) 583.9 697.5 828.7 508.0b 378.2c Total external debt ($ m) 5,464 5,872 6,202 5,982 6,120 External debt-service ratio, paid (%) 22.9 21.4 23.5 27.4 26.6 Cocoa productione (‘000 tonnes) 290 404 323 409 390b Gold production (m fine oz) 1.5 1.6 1.6 1.7 2.3b Exchange rate (av; C:$) 957 1,200 1,637 2,050 2,314c

August 13th 1999 C2,620:$1

Origins of gross domestic product 1997 % of total Components of gross domestic product 1997 % of total Agriculture, forestry & fishing 36.6 Private consumption 80.0 Industry 25.4 Government consumption 12.4 Manufacturing 9.2 Gross domestic investment 23.6 Services 28.7 Exports of goods & services 19.8 GDP at factor cost 100.0f Imports of goods & services –36.5 GDP at market prices 100.0g

Principal exports 1997 $ m Principal imports 1990 $ m Gold 579 Capital goods 544 Cocoa beans & products 470 Intermediate goods 356 Timber & products 172 Fuel & energy 210 Consumer goods 124

Main destinations of exports 1997h % of total Main origins of imports 1997h % of total Togo 13 UK 15 UK 12 Nigeria 14 Germany 10 US 10 US 9 Germany 6 France 7 Spain 5 a EIU estimates. b Official estimate. c Actual. d Balance-of-payments basis. e Crop years beginning in October of calendar year. f Does not total at source due to omission of net indirect taxes. g Does not equal total due to rounding. h Based on partners’ trade returns; subject to a wide margin of error.

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 6 Ghana

Outlook for 1999-2000

The NDC’s past may come The 20th anniversary of the June 4th seizure of power by junior officers, which back to haunt it— brought the current president, Jerry John Rawlings, to power for the first time, was celebrated this year by the ruling National Democratic Congress (NDC) as an important historical moment in Ghana’s modern history. However, for those who suffered in the early years of the Rawlings government and the pro- visional National Defence Council (PNDC, the precursor of the NDC), including the families of those killed by young idealistic military officers, the date has only served to remind them of the excesses of the time. It is in this context that demands have now resurfaced for the establishment of an official body, along the lines of South Africa’s Truth and Reconciliation Commission, to in- vestigate the past. In particular, the calls for a new enquiry into the murder of three high court judges in 1983, prompted by legal challenges by their families, are expected to gather momentum in the run-up to the presidential and legislative elections in 2000.

—which could affect the Although any broad investigation into the early years of Mr Rawlings’s reign succession question will take years to establish, the calls for such an enquiry will have a more im- mediate impact. It is likely to prompt a rethink in strategy among Mr Rawlings’s allies, especially those who may have something to hide. Al- though the president’s current favourite to succeed him, the vice-president and former law professor, John Atta Mills, has been provisionally accepted by the upper echelons of the NDC, they may now change their mind for fear that he will be too legalistic to protect them in Mr Rawlings’s absence. They may even suggest to the president that he stay on as head of state after 2000, even though he is constitutionally barred from doing so. Mr Rawlings will almost certainly resist this pressure, given his repeated assurances that he will retire and the international furore that any backtracking on this would create. The most likely outcome is that some kind of implicit bargain will be struck under which Mr Atta Mills will gain power in exchange for not delving into the past. However, should it become clear that Mr Atta Mills would not protect those who are likely to be at the centre of any investigations, Mr Rawlings will come under increasing pressure to drop him in favour of someone more amenable, and the issue of succession will once again be thrown wide open.

The forthcoming election Although the NDC rolled to easy victories in both 1992 and 1996, the 2000 promises to be a close elections promise to be close. Two recent by-elections have shown a deterior- affair— ation in support for the NDC (see The political scene), while the emergence of the National Reform Party (NRP), a splinter group of the NDC, has the potential to create further internal dissent within the ruling party and will distract it from mobilising voters. More importantly, however, the NDC remains very much a vehicle for Mr Rawlings and a great deal of its popularity is due to the charisma of the president. Without Mr Rawlings as its leader, it may be difficult for the NDC to rally voters for Mr Atta Mills, who is an intelligent and capable man, but is much quieter and less forceful than Mr Rawlings.

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—but the NDC will Given the animosities between the major parties, the election campaign is probably remain in power likely to be bitter. Yet, in the end, the organisational capacity and considerable resources of the NDC will almost certainly prevail despite its troubles. The NRP has the potential to embarrass the NDC as its members are aware of the ruling party’s weaknesses and will thus be able to exploit potential fractures. However, its leaders, including Goosie Tanoh, have many enemies and NDC loyalists have probably already infiltrated the party with the aim of antagonising internal divisions within the NRP. Meanwhile, the main opposition New Patriotic Party (NPP) looks set to increase its seats in parliament, but is unlikely to be able to muster enough rural support (outside of the Ashanti region) to pose a real threat to the NDC. Besides, the choice of John Kuffour as the presidential candidate will hinder its chances, as was the case in 1996. A younger or more charismatic leader would have been better placed to challenge Mr Atta Mills, while the arrival of the NRP will probably dilute the NPP’s anti-government vote.

Ethnicity will not be a Although there are some regional and ethnic patterns to voting in Ghana, ethnic major factor— divisions are not a major problem. Much has recently been made of a possible rift between President Rawlings and the new Ashanti king, but the situation has probably been exaggerated by NDC critics who wish to create the impression that the NDC is anti-Ashanti (see The political scene). Given that the Ashanti region is the heartland of Ghana’s economy, and that about 25% of the electorate is from the region, the NDC will not be seeking to agitate the country’s largest ethnic group. However, Mr Rawlings’s personal style—he often speaks his mind regardless of diplomatic niceties—will probably create further opportunities for his opponents to capitalise on such episodes in the run-up to the elections in 2000.

—but labour unrest will Another potential source of embarrassment for the government will be in- increase creasing labour strife. Civil servants recently took to the streets to protest at chaotic implementation of salary restructuring, which grew into a broader anti- government demonstration. Unresolved issues with several other trade unions and student groups also have the potential to lead to street protests. The most troubling labour issue, however, will be how to cope with job losses in the mining sector as the declining international gold price forces dramatic restructuring. If the gold price remains below $300/oz for a longer period, the mines will have to cut jobs to avoid closure. The result will be a loss of income for many Ghanaians as well as the substantial social service package which the mines provide for workers and their families.

Fiscal targets will be missed Although the budget appears to be roughly within the boundaries set by the but donor flows will government for the first quarter of 1999, expenditure targets will come under continue increasing pressure later this year. With a view to the forthcoming elections, the government is likely to seek an early compromise on civil service wage demands, making it perhaps more generous than it would otherwise have been. Other election-related spending will also rise, especially new development projects, and the government has already agreed to maintain the producer price paid to cocoa farmers despite the 25% drop in international prices (see Agriculture). Nevertheless, the NDC is unlikely to be as profligate as it was in

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1992 and 1996, as it will want to maintain the good relations with donors that it has just managed to re-establish after the 1996 spending spree. There also seems to be a greater understanding of economic policy issues generally within the NDC, especially with the growing influence of Mr Atta Mills. Thus even though the government’s budget deficit targets of 5.5% of GDP in 1999 and 4.7% of GDP in 2000 will almost certainly be exceeded, the deficit should remain comfortably below 10% of GDP. Assuming that Mr Rawlings does step down and that government spending is not too profligate, close relations with donors are likely to continue in 1999-2000, providing extra donor support that will help to bridge any financing gap.

Real GDP growth will The resumption of normal electricity supplies and falling interest rates bodes increase to 5% in 1999 well for economic growth in 1999. Manufacturing is expected to benefit in particular from the normalisation of power supplies after running at well below capacity in 1998, and sectoral growth is forecast at 5%. At the same time, healthy rains during the cocoa mid-crop season indicate that agriculture should continue to grow solidly, at 3%. Although mining activity will be affected by the declining gold prices, mining output is still expected to post growth of 3% as production increases at the main Obuasi mine. Overall, real GDP growth is forecast to grow by 5% in 1999, just below the official forecast of 5.5%.

In 2000, assuming normal rainfall, agriculture should continue to expand, with growth estimated at 4%, especially as prices paid to cocoa producers (if not the international price) increase in cedi terms. Mining should begin to reap some of the benefits of the current restructuring and rationalisation. With an antici- pated modest recovery in gold prices, growth of 3% is again expected. Manu- facturing growth is also forecast to remain steady at 5%, aided by a decline in interest rates and a weakening of the cedi which will improve its competitive- ness. Thus real GDP growth is forecast to rise to 5.5%, although this is still below the official forecast of 6%.

The downward trend in In May the year-on-year inflation rate fell to 9.4% from 10.2% in April, the prices is coming to an end lowest rate since October 1985. The decline was attributed to improved food supplies and tighter monetary conditions (see The economy) and caused a degree of optimism in government circles that the official target of 9% by end- 1999 may be reached. However, inflation again increased to 10.4% in June on the back of fuel price increases, a trend which is likely to be compounded by rising import prices as oil prices rise and the value of the cedi drops. Thus, even though food prices should remain stable, average annual inflation is forecast at 14% this year. In 2000 the effects of the depreciation and rising pre-election government spending are expected to maintain inflationary pressure and average annual inflation is expected to rise to 15%.

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Forecast summary (domestic) (% change, year on year)

1997a 1998b 1999c 2000c Real GDP growth 5.1 4.6 5.0 5.5 Mining 2.0 4.0 3.0 3.0 Agriculture 4.3 5.4 3.0 4.0 Manufacturing 7.0 1.0 5.0 5.0 Consumer price inflation (av) 27.9 19.4a 14.0 15.0

a Actual. b Official estimates. c EIU forecasts.

Cocoa production will Preliminary data for the mid-crop cocoa season suggest that total production be strong for 1998/99 (October-September), including smuggled cocoa from Côte d’Ivoire, should reach 390,000 tonnes, just below last year’s bumper crop of 409,000 tonnes (see Agriculture). In 2000 the government’s decision to maintain higher producer prices will help to keep production growth at the levels of recent years. Assuming that rains are normal and there is no major outbreak of disease, total production should rise to around 400,000 tonnes. However, strong growth in global cocoa production and stagnant consumption have pushed cocoa prices down this year. According to the EIU’s World commodity forecasts: food, feedstuffs and beverages, cocoa prices are forecast to fall by an average of 23% in 1999, and further by 13% in 2000. Renewed efforts to co- operate with Côte d’Ivoire to boost cocoa prices are not expected to have any measurable impact on prices (see Agriculture). The overall impact of Ghana’s cocoa export earnings is expected to be a drop to $450m in 1998, and $435m in 2000.

Gold faces an uncertain International gold prices fell to a 20-year low in July, following sales by the future— Bank of England. The EIU’s Global economic outlook has forecast that the price of gold will fall by 8% to average $270/oz in 1999, rising to just $276/oz in 2000, and it is not expected to breach the benchmark $300/oz level again until mid-2001. As a result, gold export earnings are forecast to fall around 5% to $650m in 1999 before rising marginally to $660m in 2000.

Total timber export earnings are forecast to fall slightly in 1999 to $1.68bn from $1.82bn in 1998, as timber earnings are expected to increase slightly as demand in Europe remains strong and non-traditional exports remain stable. In 2000 timber earnings should be stable but some growth in non-traditional exports is expected as manufacturing industry expands, and total export earnings are forecast to rise slightly to $1.70bn.

—as the current-account Rising oil prices, demand for capital goods from investors in Ghana’s new deficit widens— power projects and a surge in imported consumer goods resulting from government pre-election spending mean that total imports are forecast to rise to $2.15bn in 1999. The pressure from government expenditure will remain in 2000, when total import spending is expected to rise further to $2.2bn. The overall impact of falling world prices for Ghana’s principal exports and modest increases in import demand will lead to a widening of the current-account deficit to $285m in 1999 and $360m in 2000.

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—but the cedi will fall After 18 months of nominal stability, the cedi has seen a decline of some 9% so further far this year and will face further downward pressure in the fourth quarter. This is partly a correction for the real appreciation which occurred when the cedi fell by just 4% in 1998, while inflation was closer to 20%. However, falling world prices for gold and cocoa, together with rising inflation, suggest that the cedi will continue to fall this year to an estimated C3,050:$1 in December, leaving an average rate of C2,700:$1 for 1999. In 2000 inflows of foreign direct investment, associated with Ghana’s independent power projects, and donor funds should help to stabilise the cedi in real terms. The currency is expected to fall roughly in line with inflation differentials to an average of C3,250:$1 in 2000, giving a year-end rate of 3,350:$1.

Forecast summary (external) ($ m unless otherwise indicated)

1997a 1998b 1999c 2000c Merchandise exports fob 1,490 1,820 1,685 1,700 of which: cocoa 470 580 450 435 gold 545 682 650 660 Merchandise imports fob 2,128 2,098 2,150 2,227 Current-account balance –541 –255 –285 –360 Exchange rate (av; C:$) 2,050 2,314a 2,700 3,250 Exchange rate (year-end; C:$) 2,273 2,326a 3,050 3,350

a Actual. b EIU estimates. c EIU forecasts.

Gross domestic product Real exchange rates (c) % real change, year on year 1990=100

130 Ghana Naira:$ Sub-Saharan Africa 120 6 110 5

4 100

3 90

2 80 1 70 0 1996 97 98(a) 99(b) 2000(b) Cedi:$ 60 (a) Official and EIU estimates. (b) EIU forecasts. (c) Nominal CFAfr:$ (d) exchange rates adjusted for changes in relative consumer prices. (d) Côte d'Ivoire. 1990 91 92 93 94 95 9697 97 98 9899(b) 99 2000(b) 2000 Sources: EIU; IMF, International Financial Statistics.

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Review

The political scene

The anniversary of the On June 4th the president, Jerry John Rawlings, celebrated the 20th anniver- uprising on June 4th— sary of the uprising by junior military officers which brought him to power. For Mr Rawlings and many of his allies, this date holds particular importance as the start of the “revolution”, designed to make a break from Ghana’s corrupt past. The president continues frequently to invoke the populist spirit of June 4th in his speeches, even though Ghana has pursued a largely orthodox economic policy since 1983 and many of his allies from the early years have since broken with the ruling party. After his first coup d'etat, Mr Rawlings handed power to a civilian regime but staged another coup on December 31st 1981 when he began his 18-year unbroken reign.

—is a source of disaffection However, for many Ghanaians, this anniversary has only served to rekindle memories of the excesses of the early years of Mr Rawlings’s rule. Considerable resentment remains among those who lost businesses or had family members killed in the campaign to punish those considered corrupt by the young military government. Three former heads of state and several high-ranking military officers were executed and there were many other deaths under mysterious circumstances. In particular, three high court judges who were supposedly murdered in 1983 are now widely thought to have been victims of Mr Rawlings’s regime. An official investigation found a junior army officer guilty but he conveniently escaped and fled to Nigeria. The families of the judges, in particular the son of one judge, Kwabena Agyepong, have pursued a high-profile campaign that the official investigation was flawed and in late June Mr Agyepong claimed that his father’s supposed killer had written to Mr Rawlings from Nigeria asking for financial assistance. While the government continues to insist that the original investigation and conviction was correct, there is increasing speculation that Ghana may require some kind of truth and reconciliation commission to heal the fractures caused by the past. (see Outlook for 1999-2000).

Tensions between the NDC In the run-up to the presidential and legislative elections next year, tensions and the NPP continue— are mounting between the ruling National Democratic Congress (NDC) and the main opposition party, New Patriotic Party (NPP). Animosity between party leaders has traditionally run very high, with debates often becoming vitriolic and personal. In June a parliamentary debate over increasing the opposition’s access to the media reportedly turned into a shouting match between members of parliament (MPs). Some local newspapers—most of which in Ghana are notoriously biased and unreliable—have reported that the minority leader in parliament, Joseph Mensah, even claimed that Ghanaians had the right to political freedom by “all means necessary, including armed force”. Mr Mensah was apparently responding to claims by Mr Rawlings that he was linked to an attempt to overthrow the government in the 1980s. Despite the increasingly antagonistic rhetoric of the main political players, the chance of any military

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activity in the 2000 elections is remote—but a bitter election season is almost certain.

—but the rift between the In a further sign of underlying political tensions, there have been reports of president and the new emerging friction between the government and the new Ashanti king Ashanti king is overstated (Asantehene), Opoku Ware II, who was enthroned in February (2nd quarter 1999, page 11). During a meeting between the president and the king in June, Mr Rawlings appeared to be lecturing the king about the dangers of ethnicity in politics. Traditional leaders have tended to stay out of politics, but the fact that the Ashanti region is the stronghold of the opposition NPP has unavoidably thrust the king into a delicate position with the current government. Mr Rawlings, for his part, frequently strays from his advisers’ scripts and speaks frankly and emotionally about issues, and this is sometimes interpreted as patronising. While this may indeed have been the case again, it gave critics of Mr Rawlings the perfect opportunity to stir ethnic divisions, claiming it was a sign that the government intends to infringe upon the king’s traditional authority. Yet it is unlikely that the government is seeking intentionally to aggravate the Ashantis, which make up nearly 25% of the electorate, so close to the next elections. Nevertheless, any further differences of opinion will be seized upon by Mr Rawlings’s critics and this may become an electoral issue.

The National Reform Party In late July the National Reform Party (NRP) was registered by the Electoral is registered— Commission as a full political party. The NRP has been created by one branch of the Reform Movement (RM), which emerged last year as a splinter group of disaffected NDC activists (2nd quarter 1999, page 10). For the most part NRP members appear to be left-wingers disenchanted with the direction of the “revolution” and the lack of democracy within the ruling party, but the new party will also attract political activists of all persuasions hoping to challenge the NDC in the 2000 elections. However, organisational problems and resources are likely to hinder the party’s effectiveness for some time. Also, some questions remain unanswered over the NRP’s leadership. On the registration documents, the interim national chairman is listed as Peter Kpordugbe, a former high-ranking government official, and there is no mention of Goosie Tanoh who is widely considered to be the real leader of the breakaway group. Another branch of the RM, led by Sam Garba, returned to the fold of the NDC in March.

—and claims harassment by During a press conference following the registration, the NRP leaders accused the ruling party— the authorities of harassing its members, including threats of arrest and even some detentions by security forces. A report in the London-based bi-monthly, Africa Confidential, suggests that political pressure from the government led the British Department for International Development (DFID) to cancel a contract with a consultant linked to the RM. Although both the British and Ghanaian governments have denied any intervention, NDC officials have put pressure on potential defectors from the party. Mr Garba had his house surrounded by security officials prior to his faction’s return to the party. These reactions reflect not only personal antagonisms but also possibly the realisation that the RM— and now the NRP—may be a potential threat to the NDC.

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—while the Convention While the NDC may fear the emergence of the NRP, other smaller opposition Party is in disarray parties continue to be dogged by infighting. In June—and in a replay of similar events several years ago—a court injunction over procedural matters by anonymous Convention Party (CP) members forced a one-month delay in its national congress, for which some CP officials blamed NDC infiltrators. In mid-July the congress finally ended without the party selecting a chairman or leader for the next elections, suggesting that the struggle between personalities for leadership posts has not only been stifling other party activities but will hinder any chances of even marginal electoral success in 2000. According to local press reports, Abubakar Alhassan and Edmund Delle were the leading contenders to head the party, but neither could win a decisive victory and neither was willing to concede to the other. The CP, which currently holds five seats in parliament, was formed in 1997 after the merger of two parties claiming the legacy of Ghana’s first president, Kwame Nkrumah.

The NDC wins a by-election In late May the NDC won a by-election in the Lambussie constituency in the Upper West region. The result was no surprise, but the NDC’s margin of victory was a disappointment as it was less than in the previous poll in 1996. In that year Luke Koo, whose recent death necessitated the new vote, won 80% of the vote, but this year the NDC candidate, Alice Boon, won just 73%. While this may appear to be a modest decline, it comes soon after a very disappointing result in the Ablekuma Central by-election (2nd quarter 1999, page 11) and may foreshadow the difficulties that the NDC will have in campaigning without the charismatic Jerry Rawlings at the helm.

New measures are Although Ghana remains a relatively safe country, crime is becoming an in- introduced to cut crime creasing problem (2nd quarter 1999, pages 11-12). A high-profile armed rob- bery of a truck delivering gold bullion earlier in the year raised concerns over deteriorating security, which have been heightened by similar incidents in recent months. In June ten armed robbers in police uniforms stormed a super- market at Konongo-Odumase, while in July 50 armed men stole a safe and an electricity generator from a rural bank in the Ashanti region. In response, the government has mobilised special forces and intelligence units from the military to tackle crime. In July these units held a four-day exercise to sharpen their skills and as a show of force against increasingly bold criminal gangs. In August the government took what is likely to be an unpopular move and reintroduced roadblocks on major roads in an attempt to improve public security.

Student groups threaten Last year’s dispute over university fees seems set to continue throughout 1999. protests— In July prospective students at the University of Ghana’s main campus at Legon received letters demanding a C300,000 ($116) deposit prior to the beginning of the new academic year, representing a partial payment of fees, which are set to increase this year by between 53% and 125% (depending on the degree and status). In response—and in an apparent change of strategy from last year’s failed unilateral struggle to reduce fees—student union leaders have sought the support of the major trade unions. Although the deposit requirement was eventually rescinded after an uproar in the press, in early August the National Union of Ghana Students (NUGS) was calling for a campaign of demonstrations and civil disobedience against the fee increases. The student and trade

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 14 Ghana

union leaders have attempted to paint the dispute as a class battle, but the current government has always had an uneasy relationship with the universities. Many professors are actively involved with opposition parties and student groups have been consistently critical of the government. In addition, some NDC leaders who are not university-educated have long resented what they in- terpret as elitism at Legon and many of the academics who initially provided Mr Rawlings with ideological backing for his revolution soon fell out of favour.

—and labour unrest swells Although student demonstrations will concern the government, labour dis- putes will take a higher priority. In addition to the strike at the flagship Obuasi mine of Ghana’s largest company, Ashanti Goldfields Company (AGC), in May (2nd quarter 1999, page 19), the ongoing struggle over civil service wage restructuring is threatening to spill over into direct action. More than three years ago the government hired the international accounting firm, Price Waterhouse, to make suggestions on new salary scales. However, the Price Waterhouse rec- ommendations have provoked controversy over the benchmarks used and their contents—which have not been released in their entirety to the public— continue to be debated. Some unions have signed agreements with the government on salary restructuring, but the union for university teachers and the umbrella Trade Union Congress (TUC) have yet to sign. Meanwhile, the civil servants, teachers and nurses who did sign are complaining that the implementation of the new salaries has been chaotic, with thousands failing to re- ceive any salaries at all in June. In late July workers held a mock funeral for a top official at the Ministry of Unemployment and Social Welfare, which grew into a broader protest against the government.

Economic policy

The World Bank supports Following the approval of its fourth enhanced structural adjustment facility economic reforms— (ESAF) in May (2nd quarter 1999, pages 12-13), Ghana has received a $180m credit from the World Bank (see Foreign trade, aid and payments). This Second Economic and Reform Support Operation Credit—Ghana’s largest loan to date from the World Bank—is intended to support further reforms and encourage private investment. In particular, this latest facility is to assist the government in restructuring three sectors: cocoa, banking and energy.

• In the cocoa sector , the loan will support liberalisation of external marketing, which the minister of finance, Kwame Peprah, recently confirmed will begin in October 2000 (see Agriculture).

• In the banking sector, the money will reportedly be used to improve the overall soundness of the financial system, which presumably involves improving the regulatory capacity of the Bank of Ghana (BoG, the central bank).

• In the energy sector, reforms will focus on facilitating greater private-sector participation in the generation and distribution of power.

—with a focus on Privatisation remains a central element of the reform process that the new loan privatisation is intended to support, in line with the government’s policy framework paper

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Ghana 15

released in conjunction with the IMF following the ESAF announcement in May (2nd quarter 1999, page 13). One of Ghana’s two deputy ministers of finance, Moses Asaga, in June confirmed to a parliamentary committee that the sale of the Electricity Company of Ghana (ECG) will take place soon. In addition, local newspapers have reported that the private sector is expected to be responsible for cargo handling at Tema and Takoradi ports, although the ports themselves will remain in state hands. The Divestiture Implementation Committee (DIC) also announced in June that it had successfully sold the Ghana Bottling Company, which has the national franchise for Pepsi-Cola, to a consortium of local and foreign investors, led by Beverage Investments Ghana Limited (BIGL) for about $3m. Although much of the privatisation programme remains uncontroversial, some legal challenges—of the type that hindered the sale of Ashanti Goldfields in 1994—can be expected. In an attempt to head off criticism that the interests of Ghanaians are not being protected under privatisation, the government will try and tighten regulation ahead of any sales, especially of utilities such as the ECG. New legislation on port regulation is already before parliament.

VAT collection is on According to the other deputy minister of finance, Victor Selormey, the intro- course— duction of value-added tax (VAT) at the end of last year (1st quarter 1999, page 15) has been successful. Although there has been some confusion over the new tax’s implementation, a total of C163bn ($63m), or 23%, of the annual target of 720bn revenue had been collected in the first quarter of 1999. Mr Selormey said that, with the implementation of enforcement procedures, collection rates are expected to improve. Several high-profile arrests and heavy fines of VAT evaders have helped to encourage compliance.

—but there are concerns Although fiscal policy appears to be generally sound, as shown by the strong about the government’s support of the IMF and other donors which have been closely monitoring payment arrears public finances, the level of government payment arrears remains a cause for concern. According to Bartholomew Armah, an economist at the Accra-based think tank, the Institute for Economic Affairs (IEA), domestic arrears increased by some 23% between 1997 and 1998. The latest Quarterly Economic Bulletin from the BoG shows that domestic arrears fell in the first quarter of 1999 to C20bn ($8m), less than half the C48bn recorded in the first quarter of 1998. However, even relatively low levels of domestic arrears, which appear to be a convenient short-term method for the government to help meet fiscal targets, squeeze private-sector liquidity. In addition, because contractors are not paid interest for late payments by the state, private firms are indirectly covering the fiscal deficit.

Ghana’s domestic payment arrears (C bn)

1997 1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Arrears 0 20 3 61 48 23 25 7 20 Source: Bank of Ghana.

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 16 Ghana

An export zone is launched On July 17th President Rawlings officially opened the first free zone at Tema port. The industrial enclave is being developed by a Malaysian company, Business Focus, and 71 companies have so far been granted licences, of which 46 are already operating. The free zones were established under a 1995 parliamentary act, and encompass a tax- and duty-free area designed to diversify Ghana’s industrial base by encouraging foreign investment through a web of incentives.

Provisions of the Ghana free zones

Import and export duties: 100% exempt.

Taxation: No corporate income tax for ten-years; capped at 8% after ten years.

Customs: No import licensing requirements.

Foreign ownership: No restrictions.

Capital/profit repatriation: No restrictions on the repatriation of dividends or profits, payments on foreign loan servicing or the remittance of proceeds from the sale of an interest in the zone.

Local market: Up to 30% of production can be sold on local market.

Source: Ghana Free Zones Board.

A census will be conducted The government has provided C30bn ($12m), or about 75% of the total cost, next year to its statistical service to conduct a national population census in March-April 2000. Donors are expected to provide the remaining funds as part of an effort to improve the quality of the country’s official data. Ghana’s last housing and population census was in 1984. The EIU has forecast that Ghana’s total popula- Population m tion, based on UN population estimates and an average annual growth rate of

20 2.8%, will be just under 20m in 2000.

18 The economy 16

14 The reliability of official data, including estimates for real GDP growth in 1998,

12 have for some time been the subject of dispute, and two independent research institutes in Accra, the Institute of Economic Affairs (IEA) and the Centre for 10 Economic Policy Analysis (CEPA), have openly questioned their reliability. 8 According to the Bank of Ghana (BoG, the central bank), real GDP growth in 1998 was 4.6%, but CEPA has estimated that growth was closer to 2.9%. More 1980. . . . 85 . . . . 90 . . . . 95 . . . .2000 specifically, CEPA has noted discrepancies between cocoa output and export Sources: IMF; EIU. figures and claims that the official 12% growth rate in the cocoa sector in 1998 is overoptimistic, especially in the light of official statements that cocoa processing was badly hit by the electricity crisis (see Agriculture). The EIU also continues to treat official data on GDP growth with scepticism, but the fact

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Ghana 17

that the IMF seems to have accepted the data suggests that it will become official.

Inflation falls into single In May the year-on-year inflation rate fell to just 9.4% from 10.2% in April, the digits— lowest rate since October 1985. The government attributed the drop to improved food supplies, which account for more than half of the consumer price index (CPI). Tighter monetary conditions appear to have also helped, with money supply (M3) growth falling to an annualised 17.3% in March from 37.1% in March 1998. The governor of the BoG, Kwabena Duffour, has forecast year-end money supply growth of just 14.6% and inflation of 9%. However, a 15% hike in fuel prices, 10% rise in public transportation fares and 30% increase in water tariffs were all announced in June, pushing the rate of inflation to 10.3% in that month and suggesting that further increases are likely (see Outlook for 1999-2000).

Inflation (% change, year on year)

1998 1999 Annual average Dec Jan Feb Mar Apr May June CPI 19.4 15.7 15.3 15.0 13.7 10.2 9.4 10.4 Source: Bank of Ghana.

—but interest rates remain Although inflation dropped in 1998 and early 1999, interest rates initially high failed to fall as fast or as far. The BoG’s discount rate dropped to 27% in April from 32%, but this still leaves a real interest rate of some 17%, while Treasury bills have held steady at 25-26% since the beginning of the year. The persis- tence of high rates in the light of falling inflation has led to increasing com- plaints from business groups and, although banks dropped their prime lending rate to 29.5% in early August from 37.2% in March, commercial borrowing remains expensive. This is partly because Treasury bills remain an attractive risk-free investment, but also possibly points to fears of a resurgence of inflation in the fourth quarter.

The cedi begins an overdue After remaining stable in 1998, when the cedi’s nominal exchange rate fell by a decline mere 4.1%, the currency has depreciated by some 12% so far this year. While some businesses and BoG officials are fearful of the impact of a weaker cedi on inflation, exporters are welcoming the drop as a release from the pressure that had been building for about two years. Given that the average rate of inflation was nearly 20% in 1998, the cedi was appreciating in real terms at that time. The BoG insists that it has not been intervening in the foreign-exchange market, but admits that its policy remains solidly anti-inflationary. However, the re-emergence of a parallel market for the cedi, where rates are reportedly 10% higher than the official rate, suggests that there may have been some discreet intervention. The findings of a recent IEA survey of foreign-exchange bureaux, which reported frequent shortages of hard currency, supports concerns that market forces were not being allowed to determine the exchange rate (2nd quarter 1999, pages 15-16).

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 18 Ghana

FDI inflows have increased A recent report from the UN Conference on Trade and Development (UNCTAD) found that overall foreign direct investment (FDI) in Africa has been growing. Although the oil sector continues to attract the vast majority of FDI and oil-producing economies are at the top of the FDI table, there is considerable growth in recent years of FDI to a more diverse range of sectors. Ghana, in particular, has shown rapid growth in FDI, raising its annual average inflow to $133m in 1993-97, up from just $15m in the previous five-year period. Much of Ghana’s investment was in mining, although there was also substantial investment in the manufacturing and services industries.

FDI inflows into Africa Cocoa prices (a) ($ m; annual averages) £/tonne 1983-87 1988-92 1993-97 1,200 Nigeria 369 892 1,503 1,100 South Africa –38 9 755 Angola 160 190 254 1,000 Côte d’Ivoire 49 –19 182 900 Ghana 4 15 133

800 Uganda –1 0 112 Namibia 5 53 110 700 Sub-Saharan Africa 962 1,856 3,990

Jan . . Apr . . Jul . .Oct. . Jan . . Apr . . Jul . Source: UNCTAD. 1998 99

(a) London Commodity Exchange prices. Source: Datastream. Agriculture

Cocoa prices remain in the Solid cocoa production throughout West Africa, together with stagnant global doldrums— cocoa grindings (a common proxy for consumption), has led to downward pressure on prices. Although there has been a slight recovery since a five-year low was recorded in May, cocoa prices remain 25-30% lower than at the beginning of the year. The latest edition of the EIU’s World commodity forecasts pre- dicts that prices will average 58.3 cents/lb in 1999, before falling further to 51 cents/lb in 2000 as global demand remains weak and production rises sharply.

—sparking increased co- The decline in cocoa prices has revived the idea of a cartel between Ghana and operation with Cote Côte d’Ivoire, which together produce about 60% of the world’s cocoa. d’Ivoire Officials from the two counties met in mid-July to discuss their options to boost prices. They agreed to promote forward sales through the conversion of Côte d’Ivoire’s cocoa exchange into a regional exchange, and to co-ordinate production targets. However, in the context of ongoing liberalisation of cocoa marketing in both countries—Côte d’Ivoire will fully liberalise external marketing by October 1999, while Ghana is scheduled to follow suit next year—it is difficult to foresee how government-mandated production cuts would be maintained. In addition, both countries count on cocoa for a significant amount of foreign-exchange earnings and tax revenue, making an active policy to restrict production extremely difficult to defend domestically, irrespective of prices.

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Ghana 19

Ghana is keeping producer The dip in cocoa prices comes at a particularly inopportune time for Ghana. prices high— While domestic market liberalisation is still facing teething problems and officials are nervous about the effects of opening up external marketing, there is growing political pressure on the government to protect the country’s 800,000 cocoa farmers. The government announced that it was raising the producer prices to 60% of the international price in May as part of the cocoa sector reforms, but in early June decided that it would protect farmers’ incomes in the wake of lower global prices by maintaining the producer price at C2.25m ($874)/tonne for the entire 1999/2000 season. Given current international prices of $1,100-1,200/tonne, this amounts to paying farmers some 70-80% of the price. While this may help to maintain the production gains of recent years and support the industry in the medium and long term, the exercise will be costly and may put additional strain on the government’s budget (see Outlook for 1999-2000).

—which appears to have Concerned that higher producer prices in Ghana would lead to an upsurge in encouraged smuggling smuggling from Côte d’Ivoire, the authorities closed the mid-crop marketing season a month earlier than expected, accepting purchases only up to August 12th. However, considerable smuggling had already occurred and some estimates had already put the total of smuggled Ivorian cocoa into Ghana at up to 20,000 tonnes. This is in addition to a healthy domestic mid-crop estimated at about 35,000 tonnes, up by nearly 17% on the previous mid-crop season. While the 1998/99 main crop (October-May) is expected to come in at around 340,000 tonnes, this additional Ivorian cocoa should put Ghana’s official total for 1998/99 (October-September) at some 390,000 tonnes. This is still below last year’s bumper crop of 409,000 tonnes.

The electricity crisis According to data from the research department of the Ghana Cocoa Board restricted cocoa processing (COCOBOD), cocoa processing slumped in 1998 after showing years of positive in 1998 growth. In the 1996/97 season, 22% of total production was processed locally but in 1997/98 this figure dropped to only 6%. COCOBOD blamed the energy crisis for the temporary slump. With full power supplies now available again, and a strong mid-crop (the mid-crop is usually reserved for local processing), the previous upward trend should continue, especially as processing capacity at Ghana’s three factories has been expanded in recent years.

Domestic cocoa processing (% of production)

1993/94 18 1994/95 22 1995/96 18 1996/97 22 1997/98 6 Source: Local press reports.

Army worms threaten food An invasion of army worms hit farms in Ghana’s Upper East and Northern re- crops in two regions gions in July, potentially threatening 130,000 ha of cereals. After a government-led campaign of chemical spraying, the Ministry of Food and Agriculture

EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 20 Ghana

(MOFA) claimed to have contained the damage, but it was believed that at least 72,000 ha of farmland had been affected. MOFA officials claimed that despite the worms, food production targets, even in the worst-hit regions, would still be met, alleviating fears of food insecurity in those regions. Nevertheless, the ministry will be assisting farmers to replant and is organising an early warning and training programme to combat the pests.

Mining and industry

Gold production rose According to data released by the Ghana Chamber of Mines, gold output by its rapidly in 1998— members—which includes the country’s 12 largest gold mining firms but not small-scale artisan miners—rose to 2.3m oz in 1998, a 40% rise on 1997. Ashanti Goldfields Company (AGC) accounted for 53% of this total. Given the decline in world gold prices in 1998, however, the total value of Ghana’s output by major producers rose by only 25% to $682m. But the strong growth in the number of recovered ounces supports the government’s claim that the mining sector—which is dominated by gold—adapted well to last year’s energy shortages and posted growth of some 4% in real terms.

Gold output by major producers (‘000 oz produced)

1997 1998 % change Ashanti Goldfields Company 1,040a 1,233a 19 Gold prices (a) $/oz Abosso Group – 271 –

420 Gold Fields 54 136 152

400 Barnex 33 – –

380 Dunkwa Continental Goldfields 4 1 –75 360 Tebereble Goldfields 239 251 5 340 Bogosu Gold 108 123 14 320 Bonte Gold Mines 35 35 0 300 Resolute Amansie 40 173 333 280 Prestea Sankofa 19 15 –21 260 Small-scale mines 65 70 8

1996 . . . 97 . . . 98 . . . 99 . Total incl others 1,645 2,308 40

(a) London Metal Exchange prices. a Source: Datastream. Ghana only.

Source: Ghana Chamber of Mines.

—but world gold prices Although production is showing strong gains, international gold prices have continue to fall— continued to weaken in the past quarter, falling to a 20-year low of $252.85/oz on July 20th, and remaining under $260/oz as this report goes to print. While strong global production has contributed to the slump in prices, the reason for this most recent dip—from an average price of $294/oz in 1998—was the sale of gold reserves by the Bank of England (BoE). The BoE intends to sell a total of 400 tonnes, including 125 tonnes by March 2000, in a series of auctions, the first of which was held on July 6th. Plans by the IMF to sell some of its reserves to finance debt-relief schemes for poor countries is also adding to the downward

pressure, as is the prospect of more central bank sales by the Swiss and possibly other governments (see Outlook for 1999-2000).

—prompting gold For Ghana and other gold producers, the effects of falling gold prices include producers to campaign the following: against gold sales • mining firms are slimming down their workforces, creating rising unemployment;

• some new gold exploration projects are being put on hold, especially on more marginal concessions;

• some of the higher-cost mines are shutting down altogether; and • export earnings and tax revenue are falling.

The irony of the fact that the IMF’s gold sales are intended to help heavily in- debted poor countries (HIPCs)—of which most are in Africa—has not been lost on the Ghanaian authorities. Ghana and other gold producers, especially South Africa, have been lobbying aggressively both the IMF and the British government to halt gold sales, pleading that it is taking a heavy toll on their mining companies, mine workers and government finances. The role that many mining firms in Ghana play in terms of providing education and healthcare for their workers and their families means that a decline in the mining sector could also undermine social services.

Labour strife curbs According to AGC, an 11-day strike in May (2nd quarter 1999, page 19) caused production at AGC— a production shortfall of some 63,000 oz, or 30%, at the flagship mine at Obuasi in the second quarter of this year, although this was partly compen- sated for by higher production at other mines owned by the company. Overall output was just 342,621 oz in the quarter, down by around 15% on the first quarter and by around 8% on the second quarter of 1998. Similarly, export earnings in the second quarter fell to $16.4m from $21.5m in the first quarter of 1999. However, despite these problems, AGC is still showing strong results for the first half of 1999. Although the realised price per ounce had declined slightly to $380/oz, this still represents a 36% premium over the average spot price, reflecting AGC’s aggressive hedging policy. Cash operating costs also continued to decline, but the average remains above the company’s target of $200/oz. Company officials claim that they are on course to reach that target by the end of 2000—a goal which will be helped by the closure next year of the mine at Iduapriem, which is the company’s most expensive mine and only accounts for about 11% of output.

Ashanti Goldfields Company: production and results Jan-Jun 1998 1999 % change Earnings ($ m) 30.5 37.9 24.3 Production (‘000 oz) 705.9 744.8 5.5 Realised price ($/oz) 389 380 –2.3 a Production cost ($/oz) 229 211 –7.9 a Cash operating costs. Source: AGC.

—which is expanding into Much of AGC’s recent success and growth has been the result of its aggressive Cote d’Ivoire— expansion plans since privatisation in 1994. In recent years, the company has expanded outside Ghana, buying mines in Guinea (the Siguiri mine), Tanzania (Geita) and Zimbabwe (Freda-Rebecca). Non-Ghanaian mines now account for some 22% of AGC’s total production, but, more importantly, these mines are its lowest-cost operators. The average cash operating cost at Freda-Rebecca was just $158/oz in the first half of 1999. During that same period, Siguiri was $170/oz, but the Obuasi mine averaged $230/oz (Geita is still under construction). Continuing its expansion, AGC reached an agreement with the government of Côte d’Ivoire in June for a three-year exploration permit in the Allangoua region.

—but lays off 2,000 The success of AGC’s mines outside Ghana puts the troubles at Obuasi into workers— perspective. While a wage settlement was reached in late May giving mine workers at Obuasi a $20 per month raise, the company announced in July that it would cut some 2,000 jobs at the site, which employs about 9,000 miners. Nearly 500 casual workers have already been released this year. The redundan- cies, which will be implemented over six months beginning in September, were agreed at a meeting including officials from the company, the Ghana Mine Workers Union (GMWU) and the Ministry of Mines and Energy. AGC claims that the fall in international prices for gold is the primary reason and that the move is expected to save around $9/oz in operating costs. In defending its ac- tions, the company has compared its productivity with the Carlin mine in the US, where the average number of ounces produced is 1,273 per employee, while at Obuasi the ratio is just 98 oz per worker.

—and more job losses may The job cuts also represent a change in AGC’s relations with the GMWU. In the be on the cards past, AGC and the union have worked together to hold down wages in exchange for maintaining jobs. Agreements focused on protecting the purchasing power of workers through linking salaries to the US dollar, and earlier in the year the GMWU reached an agreement with the company to freeze wages in return for not cutting jobs (workers were also offered a lump sum bonus of $131). However, rumours that workers at other mines had received a better deal caused some 500 workers to block the entrances of the mine shafts in May, leading to the strike. The deal that has now emerged signifies an end to the previous system and the gentleman’s agreement to protect jobs—and opens the door for further cuts in the future. Other Ghanaian mines have also been shedding jobs, although the country has so far not experienced the mass re- trenchments seen in South Africa. AGC released 215 employees from its Iduapriem mine, while Bogusu Gold Limited has let 800 workers go and the Tarkwa mine, owned by South Africa’s Gold Fields Limited, announced in August that it would close its underground operations, resulting in at least 1,000 job losses.

Diamond production According to recent data from the Ghana Chamber of Mines, diamond increased sharply in 1998 production from both small-scale miners and the formerly state-owned Ghana Consolidated Diamonds (GCD) showed strong growth in 1998 (although data on small-scale producers are notoriously unreliable). GCD produced a total of 823,125 carats, worth about $11m, an increase of well over 200% on 1997,

although still well below GCD’s peak production of 1.4m carats in 1978, after which poor management caused output levels to drop to 140,000 carats by the late 1980s.

Diamond output (‘000 carats)

1997 1998 % change Small-scale miners 443 557 26 Ghana Consolidated Diamonds Limited 240 823 243 Total 683 1,380 102 Source: Ghana Chamber of Mines.

Energy

Uncertainty continues to A feasibility study has reportedly been completed for the West African Gas surround the regional (WAG) pipeline project, which confirmed original construction cost estimates pipeline project of $400m. The WAG project is a pipeline to carry Nigerian gas to Togo, Benin and Ghana (and perhaps eventually to Côte d’Ivoire), to be built by a consortium led by Chevron of the US and including the Dutch oil company Shell and the national gas companies from each of the countries involved (1st quarter 1999, pages 20-21). However, other than the massive cost, several other uncertainties may yet derail the project. The consortium partners have reportedly failed to agree on whether the pipeline should be on- or offshore, with Nigeria apparently hoping to use a segment of an existing onshore pipeline. Given the obvious security considerations in the region, foreign investors are apparently heavily in favour of the offshore option. In addition, confusion over the possible competition from, or even tie-in of, a similar project to pipe gas from Côte d’Ivoire to Ghana continues to increase. A Paris- based magazine, Africa Energy & Mining, has reported that initial results from a new seismic survey off Côte d’Ivoire’s coast may point to a major new find— thus undermining Chevron’s claim that the Ivorian pipeline is an un- economical short-term venture and should be scrapped.

Health

A health survey shows Preliminary results from a health survey conduced by the Ghana Statistical declining fertility— Service in 1998 show a dramatic decline in fertility rates. In the mid-1980s Ghanaian women had an average of six children, but the average from 1993 to 1998 has dropped to 4.5 children per woman. The survey, which is intended to provide better data to evaluate the national healthcare system, also found that:

• women in rural areas have almost twice the number of children than urban women;

• knowledge of family planning has increased, with 80% of married women aware of birth control options;

• more than 50% of all children aged 12-24 months had been fully immu- nised in their first year;

• only 9% of children have received no immunisations at all; • the infant mortality rate has fallen to 56 per 1,000 children under the age of five; and

• 12% of men and 19% of women had no knowledge of HIV or AIDS.

—while the UN reports on A report from the UN on the prevalence of HIV/AIDS in Ghana has shown that the prevalance of HIV at the end of 1997 there were 210,000 people infected in the country. The report estimates that adults (defined as aged between 15 49 years) accounted for 95% of all cases, leaving an adult infection rate of just 2.4%. In fact, Ghana appears to among the least-affected African countries, where the average for the subcontinent is 8% of the adult population. The total number of AIDS orphans, or children whose mother has died of AIDS, is 90,000. Encouragingly, the infection rate among pregnant urban women appears to have stabilised between 1992 and 1996 at around 2%.

HIV/AIDS in Africa: comparative estimates (% of adult population infected)

World 1.1a Sub-Saharan Africa 8.0a Southern Africa 14.3b Eastern Africa 10.5b Horn of Africa 7.9b Central Africa 4.7b West Africa 4.1b Ghana 2.4b

a End-1998. b End-1997.

Source: UNAIDS, Ghana Epidemiological Fact Sheet.

Finance

A stockbroker is expelled In the first major financial scandal related to the Ghana Stock Exchange (GSE), from the GSE one of the country’s 12 registered stockbroking firms, United Securities Trust Limited (USTL), was expelled by the exchange’s council on June 8th for violating trading rules. Following a complaint from the Enterprise Insurance Company (EIL), which is a listed company, that USTL has misrepresented itself and mishandled funds, the GSE launched an investigation. It found that USTL had falsely claimed to be licensed to deal in government securities, had invested funds in equities against the wishes of EIL and had misled its client about its investments. As a result of the findings, USTL had its trading licence revoked and was forced to close or transfer all client accounts by June 14th. The brokerage firm appealed to the Securities Regulation Commission (SRC), but the ruling was upheld in late July. Although any financial scandal is damaging—especially to a fledgling stockmarket in Africa anxious to reassure

foreign investors about transparency and the rule of law—the case does show that the GSE and the SRC are willing to intervene when necessary. The expul- sion of USTL should be a positive sign to investors worried about the regulatory climate, especially after it took nearly nine years for the SRC to open its office. Prior to its inauguration in September 1998 (4th quarter 1998, page 22), oversight of the GSE was the responsibility of the governor of the Bank of Ghana (BoG, the central bank).

The GSE continues to slump The all-share index of the GSE has continued its slow decline in recent months, and by early August was posting an 8% loss in local-currency terms on the year to date. The index hit a low for 1999 in mid-July, down by nearly 10% on the year, before rebounding slightly in the second half of the month. Concerns over the value of the cedi have largely deterred foreign investors—who were the primary force behind a 69% rise in 1998. However, with the macro- economic picture improving, and a drop in Treasury-bill rates expected to follow the steep fall in inflation, there should be a recovery in local demand in the fourth quarter. In early August the GSE had more bids than offers for the first time this year (although 80% of the bids were a single block bid for Unilever).

Ghana Stock Exchange: selected sharesa

Share % change Market Price/earnings price (C) (year to date) capitalisation (C bn) ratio Ashanti Goldfields Company (AGC) 18,700 3.9 2,045 22 Standard Chartered Bank (SCB) 20,500 –14.6 3255 Ghana Commercial Bank (GCB) 984 –24.3 162 5 Social Security Bank (SSB) 1,980 –12.0 141 5 Unilever (UNIL) 1,890 18.1 1188 Guinness Ghana Limited (GGL) 950 18.8 112 5 Total 796b –8.2b 3,211 – a Six largest listed companies by market capitalisation; as on August 3rd 1999. b All-share index.

Source: Databank Brokerage Limited.

Foreign trade, aid and payments

Trade with the US Although it was hoped that the visit by the US president, Bill Clinton, to declines— Ghana in March 1998 and a series of high-profile conferences would boost trade between the two countries, official data released by the government in August point to a decline in bilateral trade in 1998. Exports to the US fell by 6% and imports from the US dropped by 30%. (Data on US exports from the US Department of Commerce are in line with these figures.) Although no further details are yet available to shed light on the trend, Ghana’s imports from the US are normally dominated by machinery, chemicals and cereals, while its exports to the US tend to be nearly all metals and minerals, suggesting that falling gold prices may be behind the fall in Ghana’s exports to the US.

Ghana’s trade with the US ($ m unless otherwise indicated)

1996 1997 1998 Exports to the US 171 154 144 Imports from the US 295 319 223 Trade balance –124 –165 –79 Total value traded 466 473 367 % change, year on year –2–22 Source: High Street Journal.

—as timber exports rise— According to official data reported in the local business press, Ghana’s wood product exports have grown by 7% in value and 9% in volume in the first five months of 1999, compared with the same period of 1998. Although many other African timber exporters have been severely hit by the depression in Asian demand, Ghana appears to be able to sustain exports of wood and wood products because its buyers are mainly in Europe.

—and fish exports to the EU The Ministry of Food and Agriculture (MOFA) has reported that a ban on are resumed Ghanaian fish exports to the EU has been lifted. In July 1998 the EU had put Ghana on a list of countries whose poor health standards in fishing precluded the EU accepting imports. This July, however, 13 companies started to export canned fish to Europe again and one firm, the Tema-based Liwon Company, was exporting smoked fish. However, despite the ban on exports to the EU, other markets clearly made up the slack: MOFA announced that a total of C55bn ($23.5m) worth of fish was exported in 1998, up by 17% on 1997 According to the Ghana Export Promotion Council, Ghana exported $21m worth of fish and seafood and $77m worth of “prepared foods”, which is mainly canned tuna, in 1998 and probably largely accounts for the 22% rise recorded in non-traditional exports (2nd quarter 1999, pages 23-24).

Ghana receives $180m from In late May the World Bank approved a $180 loan to support economic re- the World Bank— forms in the financial, cocoa and energy sectors (see Economic policy). The credit is based on standard International Development Agency (IDA) terms, which is a 40-year loan with a grace period of ten years and an interest rate of less than 1%.

— and infrastructure Given the cordial relations between the government and the Bretton Woods assistance from other institutions, Ghana continues to be a favourite of international donors. In donors June-July it received several new concessional loans for infrastructure projects:

• $7m from the OPEC Fund for International Development to rehabilitate the Achimota-Anyinam road;

• $94m from the US Export-Import (Ex-Im) Bank for a sea defence project at Keta; Ex-Im Bank also approved $21m for rural electrification projects;

• $37m from Spain for rural electrification and the rehabilitation of two hospitals;

• $15m from the African Development Bank (AfDB) and $5m from the World Bank for the government’s Social Investment Fund, which is a general poverty reduction programme; and

• DM90m ($49m), DM50m of which is a grant, from Germany, mostly for the rehabilitation of the Tema-Sogakope-Aflao road.

Quarterly indicators and trade data

Quarterly indicators of economic activity

1997 1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Agriculture Qtrly totals Cocoa: exports ‘000 tonnes 82.1 60.3 74.1 42.1 103.9 114.4 65.1 54.3 n/a Prices Monthly av Consumer prices, Accra: 1995=100 172.2 187.5 194.1 187.1 199.0 221.6 221.2 217.6 225.6a change year on year % 30.5 29.2 28.4 18.5 15.6 18.2 14.0 16.3 n/a Cocoa, New York & London US cents/lb 65.4 73.1 77.0 78.3 76.1 79.0 76.8 72.1 63.2b Money End-Qtr M1, seasonally adj: C bn 1,101.7 1,377.0 1,724.1 1,625.8 1,517.7 1,852.0 2,200.2 1,912.5 1,764.2 change year on year % 26.7 33.8 29.6 47.2 37.8 34.5 27.6 17.6 16.2 Foreign trade Qtrly totals Exports fobc $ m 427.5 404.6 439.5 451.9 489.9 449.8 555.6 497.6 n/a cocoa beans “ 128.9 90.0 58.6 75.4 188.6 214.2 113.0 102.7 181.0 Imports cifc ” 790.6 858.5 794.9 844.5 784.2 802.2 850.1 961.8 n/a Exchange holdings End-Qtr Monetary authorities: goldd $ m 72 71 67 65e 61 62 60 61 59 foreign exchange “ 583 509 438 454e 470 327 295 293 311 Exchange rate Market rate C:$ 1,892.7 2,023.1 2,216.3 2,272.7 2,325.6 2,325.6 2,325.6 2,325.6 2,439.0f

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Average for April-May. b Figure for 2 Qtr, 51.5. c DOTS estimates; figures are subject to revision. d End-quarter holdings at quarter’s average of London daily price less 25%. e End-November. f End-April, 2,439.0.

Sources: ICCO, Quarterly Bulletin of Cocoa Statistics; IMF, International Financial Statistics; Direction of Trade Statistics, quarterly.

Foreign tradea

($ ‘000; monthly averages)

UK USb Germany Jan-Apr Jan-Apr Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1998 1999 1996 1997 1997 1998 Exports to Ghana fob Food, drink & tobacco 1,143 1,214 5,256 4,323 333 631 of which: cereals & preparations 298 203 4,942 3,936 95 121 Textile fibres, yarn, fabrics & mnfrs 820 730 906 1,055 393 19 Petroleum & products 165 748 1,067 855c 84c 73c Chemicals 3,927 4,450 2,770 3,747d 1,336d 1,163d Paper & manufactures 380 467 161 80 464 264 Non-metallic mineral mnfrs 268 488 221 152e 94e 72e Iron & steel 985 778 131 822f 358f 537f Metal manufactures 1,566 1,789 219 69g 191g 238g Machinery incl electric 11,519 8,701 10,062 7,426 4,272 3,939 Transport equipment 3,107 1,598 1,002 4,693 3,157 1,806 Total incl others 30,069 26,173 24,528 26,067 13,806 12,209 Imports from Ghana cif Cocoa beans 17,154 12,197 2,613 588 5,834 2,566 Cocoa butter 1,331 190 0 119 1,395 2,711 Wood & mnfrs 1,381 1,354 1,074 1,540 2,755 3,012 Industrial diamonds 0 0 414 n/a n/a n/a Metalliferous ores & scrap 843 577 81 0h 0h 54h Petroleum & products 0 0 248 0 0 0 Non-metallic mineral mnfrs 5 8 8,882 8,986e 47e 12e Aluminium & alloys 1,670 0 0 739f 3,137f 2,388f Total incl others 28,430 21,309 14,888 13,293 14,663 12,193 a Figures from partners’ trade accounts. b US exports to Ghana averaged $20.1m and $18.9m per month in the period January-May 1998 and 1999. US imports from Ghana averaged $12.0m and $15.8m per month in the period January-May 1998 and 1999. c Mineral fuels. d Including crude fertilisers and manufactures of plastics. e Including precious metals & jewellery. f Including manufactures & scrap. g Tools etc and miscellaneous metal manufactures. h Ores, slag and ash.

Sources: UK HM Customs & Excise, Business Monitor, MM20; UN, External Trade Statistics, series D; US Department of Commerce News, FT900.

Direction of tradea

($ ‘000; monthly averages)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports fob 1995 1996 1997 1998 Imports cif 1995 1996 1997 1998 UK 19,583 22,333 16,800 19,433 Nigeria 32,333 35,500 39,442 40,633 Togo 13,083 15,417 16,958 19,333 UK 34,667 43,167 41,467 33,742 Italy 4,833 12,000 4,358 18,200 Italy 7,500 19,083 10,392 24,167 Netherlands 4,500 3,583 10,558 12,658 US 14,417 27,083 28,808 20,500 US 15,333 13,583 12,075 11,633 Spain 4,833 5,750 10,683 16,475 Germany 16,000 12,833 13,283 11,177 Germany 16,083 14,250 16,450 14,333 France 10,417 10,583 9,650 8,458 Côte d’Ivoire 8,417 11,333 12,442 14,200 Total incl others 134,083 141,000 143,767 166,075 Total incl others 211,417 265,417 274,050 283,192 a DOTS estimates.

Sources: IMF, Direction of Trade Statistics, yearly, quarterly.