AN41 Spotlight Ghana e limping lion The world’s second largest producer of cocoa – and rich in natural resources, including gold and oil – Ghana was destined to lead Africa’s fastest growing ‘lion’ economies over the next ten years. But falling gold prices and falling tax receipts have set back economic growth Anver Versi For the past 15 years, the management of cocoa – Ghana is the world’s second larg- at around 14 per cent and Ghana entered the Ghana’s economy has been held up – by est producer. It is now also an important oil ranks of middle-income countries. multilateral organisations such as the World producer and has the potential to become It seemed that Ghana was destined to lead Bank, among others – as the exemplary the third largest oil producer in Africa. the pack of the ‘African lions’ – a dozen or so model for other developing countries to Indeed, by 2010, when the country’s fi rst fast growing countries – over the next dec- follow. The country has enjoyed political oil began to fl ow from the Jubilee fi eld and ade at least. But during the last few months, stability, good macroeconomic manage- the price of gold nudged the US$2,000 per the country's serene progress towards its me- ment, a steady annual growth in the fi ve ounce mark, a recalculation of the country’s dium-term annual growth target of eight per per cent range and a diversifi ed economy GDP, based on more relevant data, raised cent has suffered several setbacks and the based on gold mining, manufacturing and GDP by 60 per cent. Growth was estimated ‘black swan’, in the form of a catastrophic 36 l www.global-briefing.org third quarter 2013 global G15_Spotlight_Ghana.indd 36 04/08/2013 22:38 Russia Ukraine Kazakhstan France North Atlantic Spain Turkey Morocco Tunisia Iraq Iran Canary Islands (Spain) Algeria AN41 Libya Egypt Western Sahara Saudi Arabia Mauritania Spotlight Ghana fall in the international price of gold, has Senegal made its dreaded appearance. Mali Niger Ghana Key data However, even before gold lost 25 per cent Population: 24,966,000 (2011) of its value between April and June – the Burkina Religion: Christian (69%), Muslim Djibouti biggest quarterly drop since 1968 – it was Benin (16%) with traditional animist religions clear that all was not well with the Ghanaian Guinea often practiced alongside Somalia economy. Expenditure had severely outrun Togo Nigeria Ivory Literacy among 15 to 24-year olds: revenue and left a 12 per cent defi cit black Ghana Liberia Coast 81% (2010) hole that is threatening to undermine many of Sudan the gains made leading to 2012. The Minis- Life expectancy: 64 years Ethiopia ter for Finance, Seth Terkper, has blamed the Capital: Accra defi cit on shortfalls in corporate income taxes Equatorial Guinea Infl ation: 13.1% pa 2007-2011 and grants from development partners, higher GDP growth: 8.2% pa 2007-2011 Uganda Kenya interest costs, fuel and utility subsidies, and Sao Tome GNI: US$35.1 billion higher spending on goods and services. & Principe Main exports: cocoa, gold, While Ghana’s upgrading to middle in- diamonds, oil Indian Ocean come status confi rms the success of its Burundi economic policies and makes it much more Tanzania attractive to foreign investors, it also means that the country loses a number of its sourc- South Atlantic ated from gold mining in 2011. The extra es of donor support. “As we consolidate burden could be the last straw. “Excessive Zambia our middle income status and these facili- Ghana’s upgrade to taxation on mining could be disruptive and Malawi ties become less available to us, we should kill the goose that lays the golden eggs,” di- be in a position to borrow effectively from middle income status rector of analysis, research and fi nance at the capital markets,” says Terkper. In June con rms the success of the Chamber of Mines,Angola Sulemanu Koney, Ghana issued a $1 billion Eurobond which points out. Terkper says will help reduce the defi cit to its economic policies In June, Nick Holland, Gold Fields CEO, six per cent of GDP by 2015. But this will said: “The industry is not sustainable at Mozambique not be enough, according to the IMF. and makes it much more $1,230 an ounce, which is where the goldZimbabwe “The government’s defi cit target of six attractive to foreign price is at the moment.Namibia We’re going to need per cent of GDP by 2015 will keep public at least $1,500 an ounce to sustainBotswana this in- Madagascar debt high and buffers low so the mission investors, but it means dustrySouth in Africa any reasonable form.” recommended an additional fi scal adjust- the country loses donor Some(Walvis 40 Bay) per cent of Gold Field’s out- ment of three per cent of GDP by 2015,” put comes from Ghana. Other major min- says Chistina Daseking, leader of an IMF support ers include AngloGold Ashanti and New-Swaziland mission to Ghana. This will be a tall order mont. In 2011, Ghana produced 91 tonnes for the government, especially as its tax of gold, contributing roughly 12 perLesotho cent assessment and collection regime is inef- South Africa fi cient and many still avoid paying taxes, while the large informal sector remains out- side the system. The Finance Minister has promised reforms of the system and says he will widen the net to plug loopholes. In the meantime, efforts to claw back the defi cit by raising the taxes of corporations that do pay their taxes, such as those in the mining industry, could rebound badly, es- pecially when the outlook for gold is be- coming dimmer by the day. Corporate min- ing tax was increased from 25 per cent to 35 per cent, capital allowance standardised to 20 per cent and a bill to introduce a 10 per cent windfall tax is on its way. The mining sector is already the largest taxpayer in the country, contributing 27 per cent of total direct taxes to the Ghana Rev- enue Authority’s domestic collections. It also contributed 37 per cent of the total cor- porate tax collected in 2012. Mining com- panies complain that the cost of production in Ghana is already steep and ate up 70 per cent of the $4.6 billion in revenue gener- Going for gold: the Ghanian gold mining industry had a turnover of $4.6 billion in 2011 global third quarter 2013 www.global-briefing.org l 37 G15_Spotlight_Ghana.indd 37 04/08/2013 22:38 Spotlight Ghana SADA-led dry season two of the Jubilee project is completed and irrigation farming has taken several more fi elds begin production. If all off in various Northern the commercial discoveries made so far Region ecological zones to come on stream, Ghana could well become produce crops for export the third largest oil producer in Africa after to the European market. Nigeria and Angola. Additional benefi ts are In addition, the Ghana Gas Company, job creation and a curb on set up in 2011 to avoid the wasteful fl aring rural-urban migration of natural gas that characterised the early years of the Nigerian oil industry, was ex- pected to start production in July, but delays in the release of funds from the Chinese government have held up the project. Gas will be supplied to the Tema and Ta- koradi power plants, while the 400 MW Bui hydro scheme, which is being developed Savannah Accelerated by Sino Hydro, will add to the energy mix and, hopefully, not only end the country’s chronic shortage of power but also leave a Development Authority surplus for export. Bridging the poverty gap between the north and south While Ghana has made enormous strides, Each cocoa pod holds between 30 and 50 seeds that are white when picked, turning brown when dried its economic planners now have to show a – Ghana’s Sustainable Development Initiative for the Northern Savannah nimbleness of foot to cope with unexpected to the country’s GDP. Despite the anticipa- level when mining is again sustainable. hurdles, fi scal discipline to put a cap on SADA was established in Strategic objectives: Investment opportunities in the SADA Zone tion drummed up by oil, mining and cocoa Despite these setbacks, however, the spending while raising domestic tax revenue 2010 as an Independent ■ Repositioning the NSEZ as a SADA adopts a three-prong approach in programme/ will remain the main pillars of the Gha- Ghanaian economy has been built on solid and imaginative leaps to create more job op- and Autonomous Statutory competitive economic zone in project design to achieve its set objectives: naian economy for at least the rest of this foundations and whatever it may lose on portunities and spread the fruits of growth Corporation to provide decade and both require handling with vel- the gold swings in the short run, it can gain far more equitably than at present. The mid- the Savannah/Sahel Region of 1. A growth strategy that accelerates the pace of a framework for the vet gloves. Several gold mines around the on the oil roundabouts when production dle-distance race has more or less been won West Africa. economic development in the NSEZ where investors comprehensive and long-term world and in South Africa have already been rises from its current 125,000 barrels per – now comes the long haul of the marathon. ■ Expand the scope and numbers can play a key part. development of the Northern mothballed until the gold price recovers to a day (b/pd) to 250,000 b/pd when phase Does Ghana have the staying power? ● of private sector fi rms and Savannah Ecological Zone 2.