Ghana Among Africa’s Fastest Growing Economies

Ken Ofori-Atta, Minister of Finance

GHANA MAINTAINED its status as one of
Africa’s fastest-growing economies in 2019, courtesy to an expansion of mining,
oil and gas activities, amid continuing diversification efforts.

In an evaluation released in December, the IMF
projected annual growth of seven per cent in 2019. While down on earlier
estimates of 7.5%, it is up on 2018’s expansion of 6.3%.

The revised outlook largely aligns with official
government projections of 7.1% and the latest outlook from the African
Development Bank, which forecast annual growth of 7.3%.

While year-end projections are strong,
preliminary results have been slightly more moderate.

According to data from the Ghana Statistical
Service (GSS), the economy expanded by 6.7% year-on-year (y-o-y) in the first
quarter, followed by growth of 5.7% and 5.6% in the second and third quarters,
respectively.

The overall central government deficit is
projected to remain unchanged at seven per cent of the GDP, as a result of lower-than-expected
revenue, spending on flagship programmes and unexpected security outlays,
according to the IMF.

Energy expansion

A key factor behind 2019’s growth is the double-digit
expansion in oil and gas GDP, which the IMF expects to rise by 17.1%.

Production of crude oil rose from 195,000
barrels per day (bpd) at the beginning of the year to 214,000 bpd as of August.

According to GSS data, annual oil and gas
expenditure is on track to total $3.1bn in 2019, up from $2.3 billion and $2.6 billion
in 2017 and 2018, respectively, with much of this dedicated to field
exploration.

As a result of increased exploration spending,
in November, local energy company, Springfield Group announced that it had made
two significant offshore discoveries, the first find of its size by an African
oil and gas firm. The company estimates that the discoveries contain over three
billion barrels of oil and gas.

The agriculture angle

At the same time, government is actively
seeking to bolster returns in agriculture, one of the country’s long-standing
economic drivers.

While the sector’s contribution to GDP has
declined from 32% to around 20% over the past decade, in part due to improved
performance in other industries, agriculture remained hugely important to
Ghana’s economy, employing an estimated one-third of the workforce.

Agricultural products are one of Ghana’s
main exports, and cocoa makes up around a quarter of overall export revenue. In
order to ensure higher earnings for farmers in August, Ghana and Côte d’Ivoire announced
a new pricing mechanism for the sale of cocoa beans, implementing a minimum
price of $2600 per tonne for the 2020/21 season.

The initiative, coupled with efforts to
boost domestic production of agricultural crops, aims to increase the earnings
of the sector.

While cocoa is a staple of the economy,
officials have sought to diversify the sector’s offerings and boost other segments:
exports of non-traditional products, such as cashews and shea nuts, increased
by 21% in 2018.

Tema Port expansion

Efforts to diversify the economy were
strengthened with the inauguration of the first stage of the US$1.5 billion
expansion of Tema Port, the country’s largest maritime hub.

Following the construction of a 3.5km
breakwater, additional dredging work and upgrades to three berthing facilities,
the port has a capacity to handle two-metre twenty-foot equivalent units,
double the previous limit.

On top of increasing capacity for Ghanaian
exports, the ongoing expansion of Tema – along with works to upgrade Takoradi
Port – dovetails with efforts to make Ghana a regional trans-shipment hub,
providing opportunities for growth in the transport and logistics sector.

This has already led to some promising developments.
In October, German shipping company, Hapag-Lloyd announced that Tema would be
its trans-shipment hub in West Africa.

However, some industry insiders have argued
that for Ghana – and in particular Tema – to emerge as a trans-shipment hub,
more needs to be done to ensure it is cost-competitive.

Financial clean-up

The year 2019 also saw the government continue
its proactive role in attempting to strengthen the financial sector.

In mid-August the Bank of Ghana announced
that it had revoked the licences of 23 savings and loans companies for
continued insolvency.

The development is part of ongoing efforts
to clean up the financial sector, which saw the central bank revoke the
licences of 420 institutions since 2017.

In addition to the closures, the authorities
have sought to improve investor confidence by increasing the minimum capital
requirement for commercial banks from GH¢120 million ($21 million) to GH¢400 million
(US$69.9 million), while in August, the Securities and Exchange Commission (SEC)
outlined plans to raise the limit for fund managers 20-fold, from GH¢100,000 (US$17,500)
to two million Ghana Cedis (US$349,500).

Meanwhile, in a continuation of the
country’s strong financial technology development, the value of mobile money
transactions rose by 34% y-o-y in the first half of 2019 to GH¢140.2 billion (US$24.5
billion).