Ghana Commercial bank, HIPC & Development

The recent assertion by the Finance minister that the economy is on track. And its quotation of interest rate and inflation is the repetition of the same old story all over Africa. My interaction with even some of the most educated people in Africa indicates that these terms do not make sense to them. That is, they do not understand what they mean, let alone the poor farmer in the rural area.

There are 3 main economic blocks-The HIPC bloc, the Newly Industrialized Countries (NIC) and the developed economies. The developed economies talk about wealth creation and distribution i.e. interest rate, inflation and GDP growth. Whereas the main focus and track of the HIPC countries is now poverty alleviation.

The develop economies talk about inflation and growth. Because of easy accessibility to capital (or credit) by almost every ordinary citizen. The next reason why these economies talk about growth is what is known as the trickle down theory. And that is, as the economy grow, it engenders the transfer of wealth from the rich which trickle down to the poor.

Finally these economies talk about inflation because of stable or rising income, unaffected by depreciation. And the fact that real income (wages) rises as inflation falls.

In Africa the trickle down effect does not happen. Not only that, but since the focus of African (HIPC) countries is poverty alleviation. African politicians have no moral right to talk to their citizen about inflation and interest rate.

After all, the poor man neither understands these terms nor gets access to capital (or credit. We are HIPC .Aren't we?

Again, real income is rather eroded by depreciation and rising utility and transport "bills"

In truth the right and understandable figures to use is poverty alleviation figures or index. Because these are the track for HIPC economies .And the economic parlance for the poor man.

What every African Finance minister must be telling its citizen is that, when we took over power, 6 out of every 10 people where poor(6%) .And now 2 out of every ten people are poor (2%).Period. Because the poor man can easily verify and understand these figures. Not those confusing figures about interest rate, GDP and inflation.

The poor in Africa has suffered and continue to suffer too much. The poor has been accused of what he has not done. He has to stand at number 13 in a queue to go to toilet every time (with all apology to readers).He grows cocoa but do not know how chocolate or Milo taste. He has been leered at by nice, car driving girlfriends of politicians whenever he stands at the roadside to pick "trotro" to his farm .And worse still, not to come near politics .Because he would steal from national coffers.

But the Dusenberry's effect states that the "rich" never become tired of accumulating more. Because they do not want their consumption level to fall. Those with 1 basket want 2.Those with 2 want 3 or more. And it is why drug barons and armed robbers keep going until they are arrested .Corruption has got more to do with training and discipline-than with wealth.

In most African countries (including Ghana) where majority of the people are farmers. And most urban dwellers spend a greater part of their disposable income on food. Agriculture must be the first focus of poverty alleviation policies and economic growth.

Imagine a farmer has 4 children and owns a farm of about twice the size of a football pitch. And on which he farms twice a year .This is the poor farmer's contribution to GDP.

Now divide this farm size among his family of 6.And you get the farmers per capita income.

This per capita income is what the Ghana Poverty Reduction Strategy (GPRS) is task to raise to extrapolate the $1000 mark in 2010.

To raise this farmer per capita income, you do one of four or all these things:

You give him access to farm /produce expansion facilities etc.

You reduce post harvest loses or raise is harvest per care (storage, road facilities etc)

You redeploy him out of farming (or crop) through retraining or education

Or you reduce his family size through population control i.e. reduce the denominator

But there are as many concepts and strategies as there are economist. And the most important thing is achieving results. So long. Very long. But none yet.

In fact the provision of accessible roads and Information Technology (ICT) facilities has the potential to transform the economies of Africa overnight into middle income countries. However, road construction is were the butter lies for African politicians And all over Africa you see government constructing 300 km roads that would last for a year or 2, instead of a 50k road that would last for 20 yrs.

The funny side is that most of these contractors, who are friends( or girlfriends) of politicians and politicians, are in a hurry to finish these roads 2-3 months before the rains start .Because they know they would have little to show after the rains. And the reason why these actions have continued for a very longtime is because Africans have no idea about their debt profile. It is time Africans find out from their governments about-which government contracted which loan at what interest. The project for which it was contracted. The warranty for the project. And when payment is due.

This must be included in the handing over formalities when one government takes over from the other.

Lack of accessible roads and ICT facilities is the greatest problem facing Africa today. Poor road infrastructure and storage facilities is not only impoverishing the poor farmer who losses so much after the harvest season and may be forced to cut down the following year. But also impoverish the urban dweller who keeps spending a greater part of his disposable income on food.

And that is were most African countries find themselves now, pretending to have economies-but available data and their dependence on development partners prove otherwise. In fact, economic data from Zimbabwe, Angola and Nigeria-3 of the most economically misruled nations in modern African history can send the most brilliant economists to a psychiatric hospital .Because it is easier to destroy the economic structures of a nation than to rebuild the disequilibrium. Not only that, but the expectation of the world is that-these countries rather infect their neighbors through contagious development

Africans-especially urban dwellers are now importing everything, and which in disguise are being quoted in dollars. The only thing being quoted in local currencies in Africa today-is the average wage of the poor worker.

100 percent of all the cars, electronic gadgets, computers and mobile phones are imported And a greater percentage of all the bills we pay on these gadgets find their way outside.

And this behavior and the lack of protection on basic amenities on simple things like food etc to protect local industries is widening our deficit, depreciating our currency. And perpetuating poverty.

Talking about imports reminds every economist about the sale of Ghana's 46.5 % share in Ghana Commercial Bank (GCB).The sale would create another kind of import known in economics as invisible import. Invisible import is the process by which expatriates and foreign owned companies transfer profit, dividends, fees etc out of a country to their country of origin. In a country like Ghana, were we import so much, there is the need to be careful about the pattern of divesture .Because invisible import add up to our already huge import. And has the potential to collapse many local industries, exception being the banks and export oriented companies.

That notwithstanding, by the time you read this message the decision to sell GCB, like the HIPC initiative had already being taken. Whatever debate follows, like what the TUC,ISODEC, GCB Management staff of GCB and Mr. .K.B Asante is doing -is" fo-lish and wasteful talk".

By and large the committee being set up to look into the viability of the sale would spend a day. And only use simple investment ratio from GCB's last year and this year's projected balance sheets .All of which would support its divestiture. Because these ratios are pro-capitalist. Deliberately, the committee would just delay its report because of the fat dollar consultancy fees being paid to them.

The reason to sell these shares is numerous .And some are:

The recent mismanagement of Ghana Telecom

The need for a smaller private sector as against a larger public sector

The need to remove government interference from the running of GCB

The need for government to depend on taxes rather than dividends

And the need to quickly sell the best assets to offset/ adsorbs the TOR debt as promise by government. And this is where I pity the government. Because the changing of the domestic debt into bonds (Domingo Cavallo Economics) can collapse the entire banking sector and create a great economic disequilibrium in the not-too-distant future. It is therefore a matter of snatching Peter's (GCB) to pay Peter.

The most obvious choice must have being to offload the share at the Ghana Stock Exchange(GSE) for Ghanaians to buy .Because they are more likely to reinvest the profit in the country and reduce invisible import. But what the government urgently needs is dollars. It is a matter of life or death. The government needs to act now or it would bring disgrace to itself and jeopardize all the other promises it has made.

Even if the heaven falls, the new managers for GCB would close the less profitable branches and raise the minimum deposit requirement. And thus bring to and end the enjoyment of one of the last "Banking subsidies" to the poor.

When the NPP was in opposition, they were against the privatization of water and GCB by the NDC. Now, however the NPP wants to privatize these institutions and the NDC is against it.

These clearly confirm the belief of outsiders that most African politicians are rogues, most of who smile when they refer to each other as men of integrity.

By and large the perception of western financiers and intellectuals is that:

African politicians cannot grow their country because most of them lack that experience. At best they levitate their economies. Because government find it difficult to fire non-performing members.

That most policies have been tailored by African governments to meet the need of these governments than the need of the poor. And that though divestiture has brought some success-it has not brought the maximum result because of the non transparent way it has been carried out.

That most African politicians are suffering from the African Dutch Disease (DD).

DD is the process whereby people who inherit so much natural resources or wealth. Or find themselves suddenly surrounded by comfort or boom, relax in their thinking and other areas of endeavor -especially when confronted with enormous task. The African problem is really enormous.

That it is not the IMF and World Bank policies per se that have brought untold hardship to Africa's poor. But that African politician have failed to flavor these policies to meet the needs of their poor people. Because most of them do not understand it or are self cantered.

That what is being practiced in most African countries are not democratic pluralism and transparency. But rather, democratic dictatorship.

.

And finally that the African problem can- and must be solved by Africans. What these means is that the good guys, out of principle or the acrimony have decided not to enter politics. Or there are too many square pegs in round holes

Causing financial loss to the state-if properly use would be the greatest economic robot and asset ever presented to the African poor-serving its inventors and staunch opponents. And excellently, too.