The last time I wrote about the global economic meltdown, our media was stuck on the general elections and its aftermath, skipping back and forth like music from a scratched record. Another day, another media obsession. Last week, it was which make of motor vehicle our former leader should spend his post-presidential days driving around in.
… but back in the real world. The global financial crisis remains the single biggest story there is, looming over the African horizon like a slow-but-steadily approaching giant. It is not often one gets the chance to revisit a topic so soon in a column, but so much has been written and said about the downturn since I wrote ‘Who’s Afraid of the Big, Bad Downturn?’ that the topic warrants a second look. It has been very hard to make sense of it all though.
Take, for example, last week’s declaration of confidence in Ghana’s economy from 519 Ghanaian CEOs from all ten regions, according to the Association of Ghana Industries’ (AGI) most recent Business Climate Survey. With an optimism so boundless that it cut across all sectors of the economy - especially finance, banking and insurance, and agriculture - our business leaders have spoken and, like Americans voting for Obama, they have chosen hope over fear.
Looking at agriculture, perhaps their confidence is justified. Agriculture aimed at domestic markets is less exposed to the international economic climate. Sales of Fairtrade products in the UK too continue to grow in spite of the recession, which is probably why Cadbury announced last week that it would triple the amount of Fairtrade cocoa it buys from Ghana paying a guaranteed minimum price even if it rises above the open market price for cocoa.
Our banks too have few investments, if any, in the problematic financial assets behind the global crisis. If there is anything to be fearful of, the business executives surveyed by the AGI ranked inflation as the biggest, followed by high costs of credit and high taxation levels.
On the same day the AGI report came out, Reuters was reporting that Ghanaian inflation rates had surged by 20% to their highest peak since 2004 and the Ghanaian Cedi had lost more than 30% of its value to the dollar in the past year, on account of widening budget and current account deficits. Just one week before that, the international ratings agency Fitch revised its rating of our economic outlook from ‘stable’ to ‘negative’.
The Economist’s Intelligence Unit ended last year by including Ghana on its list of the world’s fastest growing economies, predicting that Sub-Saharan Africa will perform better than other emerging regions. Last week however, we had the World Bank’s Vice-President for Africa, Ms. Obiagelli Katryn Ezekwesili, stopping by the Castle to warn President Mills and all Ghanaian people to brace ourselves. Her message in a nutshell? The worst is yet to come.
Ezekwesili predicted that the Mills administration would have considerable difficulty implementing its budgetary projections on account of a reduction in the otherwise massive sums of money that pour into Ghana from wealthier economies. As if to underline the seriousness of her prediction, the World Bank – not usually so free with its wallet – announced that it would loan Ghana up to 1.2 billion interest free dollars over the next three years to help to buffer different sectors of our economy from the crisis, accelerating an immediate payment of 250 million dollars from Ghana’s allocation within the Bank.
However, Ezekwesili cautioned that the bank’s assistance would be predicated on a number of economic factors including far-reaching budgetary reforms. Maybe I’m wrong, but that has a strong whiff of conditionality about it and is now really the time for the Western-lead World Bank to be preaching conditionality when they so royally screwed up the world’s economic system? I think not. As South African Finance Minister recently put it, "If an African country would have been the cause of the crisis, the IMF would have been at you like a tonne of bricks."
As it were, the IMF was busy last week convening a summit of Africa’s Finance Ministers in Tanzania (from where Manuel spoke). According to the IMF’s Managing Director, Dominique Strauss-Kahn (popularly known as known ‘DSK’ and not to be mistaken for a Western corporate fat cat), the African economy would indeed buck global economic trends and grow… but only by 3%.
I am not as good with figures as I try to be with words but one BBC correspondent put this all in a context that even I could understand:
“… suppose the population of the region continues to grow at 2.4%, as it did in 2007. [Then] with economic growth of 3% it would take 118 years to double output per person. At 6% economic growth it would take 20 years. At 9% - the kind of performance China has achieved in recent years - it would take just 11 years.”
In summary, 3% growth will not do much to help the African on the street for a long, long time to come.
It is a crime that, in spite of our collective efforts as a nation to move our economy forward over the past decade or so, a crisis that we had no hand in causing looks set to derail us. It is a very good thing that we are not due to produce oil for another three years. Demand for exports and industrial commodities is currently falling faster than fufu down the throat of a Ghanaian CEO in a chopbar. China predicts that things will pick up by 2010 but anything could happen over the next few months: no one really knows. In the meantime, we can at least import crude oil down from the ridiculous peaks it hit last July. Hopefully, this means that fuel prices in Ghana will fall (but I doubt it, President Mills. Hmm?)
For all of the schizophrenia in the media about our prospects, our country and our continent remain the world’s last real land of opportunity. It is even possible that growth here is what will rekindle growth elsewhere in the world, something that should be of inspiration to our super-rich, our mega-poor and to all the people in-between.
Things are indeed going to be tough, but – to use the popular pidgin words of wisdom – “wettin Ghanaians no see before?”