Business News of Thursday, 13 December 2012
Source: Daily Graphic
Economic challenges for new govt with the keenly contested elections over, the new government will have to grapple with the economic realities of the country to ensure that the economy records real growth. Charles Benoni Okine & Samuel Doe Ablordeppey report.
Pragmatic measures to create sustainable jobs to immediately absorb the excess labour force and offer more opportunities in the long-term, maintain monetary and fiscal stability and increase investor confidence will stare menacingly at the new government when sworn in on January 7, 2013.
Additionally, the need to maintain national security and cohesion, accelerate various development projects and ensure sustainable supply of power are among the major economic challenges that must engage the attention of the new administration.
The various parties campaigned rigorously on many issues of which the restoration of hope and a guarantee of accelerated growth to bring development and reduce poverty dominated, and with one of them in power, the expectations of all Ghanaians will be obviously very high. According to the Association of Ghana Industries (AGI), the largest grouping of manufacturing concerns in the country, job creation should be underlined by the government ensuring a competitive business environment, market for local produce and instituting measures to encourage such local productivity.
“We have consistently made the point that the only way to create sustainable jobs is through industrial development; we think manufacturing which is the core of industrial activity should be given priority and all the support given to promote it,” the Executive Director of the AGI, Mr Seth Twum Akwaboah, told the GRAPHIC BUSINESS.
An economic analyst and lecturer at the School of Business, University of Cape Coast, Mr John Gatsi, said there were a lot of developmental challenges facing the country and any government that comes to power must tackle them in addition to their own election promises.
“For the sitting president for instance, he has to roll out educational infrastructure very quickly to attract the confidence of the people, while a New Patriotic Party government will have to immediately implement a free SHS policy. Any of these programmes mean high expenditure which will pose a real challenge,” the economic analyst posited.
From the perspective of industry, although promoting agriculture was a good policy, it would not yield higher return for the country without value addition, hence the immediate priority for the January 2013. Mr Akwaboah said what industry expected was not necessarily a ban on any type of imports or production subsidy, but an environment that would enable local manufacturing companies to compete with their foreign counterparts. “We need to do things that will reduce the cost of doing business. On the energy front, for instance, we want adequate supply of quality and affordable power regularly,” he said. Mr Gatsi corroborated the point that industry needed reliable energy, but was hopeful that the plans outlined to close the power supply gap would help the country end the power crisis by the end of next year.
“Indications are that a lot of power projects will be commissioned in 2013. With this I believe that by the close of next year the energy challenges will come to an end,” the economic analyst, who is also a fellow of the Association of Chartered Certified Economists (ACCE), posited. What industry lacked when it came to finance was low cost medium to long-term financing. This is important because industries in other countries that compete with us can borrow long-term at cheaper costs.
The economist said financial institutions in the country were unable to mobilise a lot with which to create more credit. Coupled with this is the inability of many companies, especially smaller ones, to keep quality books of accounts which denied them credit from the banks. The government is the single largest buyer of goods and services in the country and the private sector wants policies crafted to create market for local produce.
“Government can decide that certain products and items will be sourced from local sources. Having created this market, we will then move on further to ensure that the cost becomes competitive and quality and volumes increase,” the AGI executive director explained. On job creation, Mr Gatsi was not comfortable with the social interventions that two leading parties had used to create jobs and reduce unemployment. The Ghana Union of Traders Association (GUTA) on its part wants the next government as a matter of urgency; stabilise the country’s currency against the major foreign currencies.
It said the manner to which the cedi lost its value against the dollar in particular was not only disruptive to the planning of businesses but also made imports expensive and unattractive to customers.
The President of GUTA, Mr George Ofori said traders and businesses in the country have gone through a lot of hardships because of the disruptions the currency created during the year and expressed the hope that the new administration will work to stabilise the cedi. The cedi has since the beginning of the year lost about 20 per cent of its value to the dollar which is the major trading currency for many businesses in the country.
Although the situation favoured exporters because it made their exports competitive on the international market, importers on the other hand suffered. The situation was even worse because Ghana is mainly an import-led economy and therefore, any attempt to make the cedi lose value brings serious consequences to the economy as goods and services become expensive. Mr Ofori said the investors might shy away from an economy where the value of its currency is not stable adding that “when such happens the investors become reluctant to invest and the economy’s expansion in halted”, he said adding that “it also does not bring employment opportunities to absorb the huge number of unemployed people.
“We want the new administration to have a firm grip on the fiscal and monetary policies of the country to make us able to predict the economy”, he said.
The issue of interest rate in the country has also been a major bane for businesses and individuals because the rate is considered one of the highest in the sub region. For its part, IMANI Ghana, a local think tank, said over the last five years, the country had seen the most dramatic and frightening slow-down in the reform effort over the last three decades.
The issues, it said, included the country remaining too susceptible to price cycles of specific raw materials on the international economy due to over-dependence on a few commodities. The think tank said to provide jobs beyond the imports-fuelled informal retail and services sector, the country needed to see growth in overall national capacity.
IMANI, therefore, wants the next president to follow up on the good intensions to establish an ‘integrated aluminum industrial complex’, a proposal that dates back to Ghana’s first republic. “If on January 8, 2013, the reform process is not brought back on course Ghana will continue on this descent from policy chaos towards national decay,” IMANi declared.
“The decisions over the last few years to engage strategic partners of either dubious intent or dubious capacity have severely crippled this goal,” IMANI said, and further expressed the worry that “following the haphazard sale of Ghana’s bauxite resources, and an arthritic revival of Valco on one potline, the entire policy has been dealt one blow after another.”
IMANI also thinks that the related decision of completely outsourcing the integrated gas project to a foreign entity instead of pursuing local and international public-private partnerships, for the sheer reason of meeting unrealistic timelines, has robbed this country of a golden opportunity to develop a skills base, and vital linkages with the financial sector, for this critical new resource.
“There is now evidence that the gas infrastructure project will have significant, perhaps permanent, shortcomings. The quantity of gas produced, the pricing and marketing framework, the timeframe of actual integration into the power grid, maintenance policy and a host of factors have come together in this severely challenged project to prevent the prospect of Ghana’s gas being used to power industry in the near term.”