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Monday, January 24, 2022

Is Ghana’s economy the best model for Zambia?

Columns Is Ghana’s economy the best model for Zambia?

By Edward Chisanga

I read with intrigue an article, “Economist Trevor Simumba’s submissions to President Hakainde Hichilema on economic reforms” in which he made a conclusion, “Ghana’s economy is on the mend. The trade and budget deficits are narrowing. The pace of economic growth rose to above 8 percent in 2019 onwards from 2.2 percent in 2015.”
It is my least interest to undervalue views of another professional. As a code of conduct, professionals don’t wash dirty linen in public against each other. Therefore, I simply wish to share what I know about Ghana beyond macroeconomic stability. As I’m not an economist, I can only respect what economists say, and in this case, I do for Trevor. If Trevor’s conclusion, “Ghana’s economy is on the mend” implies macroeconomic stability, I have nothing to say. But let me say something about Ghana’s situation beyond macroeconomic stability.

Many years ago, I remember the World Bank and IMF making many public statements about Ghana as a model of Africa’s success in the implementation of the structural adjustment program (SAP). I have little knowledge in economics but having worked in the United Nations for fifteen years on economic and trade issues, and using statistics for many years to help countries understand the performance of their economies, let me share with you what I know.

Again, beyond macroeconomic stability, I know that Ghana’s economy is not on the mend. Figure 1 below shows Ghana’s economic growth using GDP and per capita GDP for the period 2000-2020. For a country several times emblazoned by World Bank, IMF and many other international experts, by now Ghana’s economy should have shown good example for other African countries.

First, Figure 1 shows that it has been struggling for many years. After the height of 14% growth of GDP and per capita GDP of about 12%, both crushed down to 0 and below 0% in 2020. This is not an indication of the “mend,” is it? For me, even if macroeconomic stability is taking place, in the midst of falling economic growth like this, the former matters little. Per capita, often ignored by economists in their analysis is extremely important as it touches the very stomach of individual citizens. But here, we see growth sinking lamentably. In other words, growth of GDP alone does not constitute economic growth when per capita, which measures the individual’s benefit or not from it is not growing.

Second, it cannot be a “mend” when Ghana’s current account balance shown in Figure 2 below has, for many years been going the downturn way. Yes, trade balance has been improving from 2014-2020 but do not ignore the past. This trend of bad performance by Ghana cannot be the model that Zambia wants to emulate.

Third, if it were a good model, trumpeted by World Bank and IMF, Ghana by now should have shown other African countries that it is champion for export value addition or exporter of more manufactured goods than primary commodities as means to integrate in global manufactured goods. As a rentier state like Zambia, Ghana needs to move away from exporting more raw mineral products into exporting more manufactured goods. That is one of Zambia’s outstanding policies for many years to be converted into action. But Ghana is not a good model for Zambia because statistics in Figure 3 below show that Ghana’s match towards global integration in manufacturing is very far. It shows that Ghana continues to export more primary commodities than manufactured goods, hence cannot be a suitable model for Zambia.

Forth, another of Zambia’s pending outstanding policy is structural transformation, meaning expanding manufacturing in the GDP. Ghana too. But for now, Ghana cannot be a model because its trend in manufacturing value added in GDP is very low. As Figure 3 below shows, the proportion of manufacturing value added in GDP slumped from about 25% in 2000 to about 10% in 2019.

Finally, Ghana has been struggling in promoting inward foreign direct investment flows. Apart from the share’s rise in GDP between 2000 and 2009, Figure 4 below shows major erosion, from 8% in 2009 to almost 3% in 2020.

Conclusion

Again, I simply wanted to provide some statistical information to help Zambians understand that while macroeconomic stability may be taking place in Ghana, that country has a long history or receiving praises for its economic match which, however has not turned into action. Good performance in macroeconomic issues might mislead people as good performance of the economy. Economy is not only about macroeconomic issues but includes economic fundamentals such as manufacturing in the economy. Despite good record in macroeconomic issues, statistics show that Ghana’s economic growth measured by GDP and per capita GDP is not a good model for Zambia. Perhaps we should try Viet Nam which has overtaken Africa in exports of manufactured goods.

16 COMMENTS

  1. It’s common knowledge that the Ghanaian economy has done very well for the foreign countries that are reaping the wealth, but not for the general population. IMF will appreciate and praise Ghana’s “progress” because they are benefitting from that country.

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  2. They say numbers do no lie. The above on face value should convince all and sundry that Ghana instead of being on a growth trajectory is actually regressing. To weigh in on this issue, my honest view is that we do not need to import or borrow any foreign incubated model, Zambia has it s own very unique circumstances that require unique models. Yes we can see can study how successful countries have done it as this provides us with a standard on which to make comaprisons.
    For starters, we face a financial services sector that has a serious disconnect with the real sector. The former has endemic high interest rates that are not conducive for the later to be put on a sustainable growth path that can lead to general productivity gains in sectors where we have comparative advantage. How…

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  3. #2 Chama. That has always been my line of thinking. Why should always want to copy from other continents. Each are is unique in the human behavior, environment, resources etc. It’s like bringing a polar bear in Zambia and expect it to survive. Our founding father Dr Kenneth Kaunda came up with ideas which he felt suited Zambia’s situation… things like Humanism, doing away with items like Coca-Cola products.

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  4. You run with the best in terms of Competitivenesss and economics Ghana may not be the best model What you need to compare basically isthe forecast say 2023
    Ghana GDP growth rate 6% Zambia 3.7% unemployment Ghana 4.2% Zambia 13.4% inflation 6% Zambia 9.3% interest rates Ghana 16% Zambia 9% current account to GDP Ghana -800 and Zambia -340 Current account to GDP is 3.5% Zambia and Ghana -2.8% The DEBT/GDP is Ghana 70% and Zambia 115% So in terms of modelling Zambia is better placed than Ghana from what I have know but it’s momentum and focus must be emulated

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  5. Hate is playing a major role in making decisions and no appreciation in the little we have done regarding manufacturing. MMD distroyed the few manufacturing companies UNIP had put in place i.e. Kafironda explosives factory. Being large consumers, we could have taken advantage of our own market and move to export explosives at the sametime reduce mine operating costs. Consistent with hate, we do not want to take advantage of our own huge market for electric energy and later to export electricity . PF doubled power generation, UPND is doing the same thing mmd did to UNIP Kafironda factory. Similarly, UPND hate will ignore PF Kawambwa cassava project

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  6. Still waiting on someone to show us how to repay the foreign debts we owe without IMF supported debt restructuring. If there’s a way outside the IMF program, I am all for it. Bashing the IMF day in day out is not what we are looking for. We need someone to show us the way…..the solution to the predicament we efficiently created for ourselves.

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  7. 1. Zambia must find its own voice and footpath and not based on another countries model. It’s as simple as that. Michael Jackson, Eddie Murphy can inspire you to be a musician or an actor. But you cannot become either of them. You must find your own style and identity to make it in show business.

    If you look at the history all powerful global corporations and national economies, they never use another corporation’s and nation’s model, but they just look at the intersections, then treasure their own strength, go back to the drawing board, find their own ideas & paths to success.

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  8. 2. Microsoft & Apple, technically run parallel to each other, yet they are completely different technology companies with different business models. McDonalds & Kentucky Fried Chicken – are different business models, with assorted products and yet they target the same consumer base.

    You can ask two software engineers or computer programmers who use different programming languages such as Python and C++ and assign them a project. They will both give you a final finished product that works and does the same job, yet they used different paths, and programming languages.

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  9. 3. Such is everything in life. To achieve success, accomplishment, find happiness, you have to utilise, [ *pick and *mix] Abilities, Gifts, Talents & Skills which work for you, and give you fulfilment. Else, you will end up chasing people’s shadows and end up nowhere.

    The answers to Zambia are within Zambia. It means being creative. It’s the only path that has worked for all successful people, corporations, nations, empires, kingdoms from the beginning of time.

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  10. These people sailed thousands of miles across oceans to America, Australia, New Zealand and turned these countries into great economies of the world. The Chinese didn’t travel beyond their borderline, they didn’t copy religion, governance, culture etc from these nations, they stayed and turned their country into the number two great economy of the world. Have confidence in yourself.

  11. I love reading things like this. Comes along with bragging rights on what is being talked about. Indeed, I agree that we need to look at ourselves and really come up with what can work for us. This also includes asking the permission of the population (via giving clear information) on this IMF direction. Then and only then will we march on (match?) confidently knowing we are entering a tunnel that has a shimmering light in the distance promising to be bright as we get closer. Anyone need a speech writer by the way?

  12. Déjà vu 11

    Thank you. A good example and well summarised point of view from you. I beg you to continue preaching the importance of belief and having confidence in ourselves. It’s the only way to turn Zambia for the better. Success starts and ends in the mind.

    The MIND is as an EMPLOYEE to every person. It must work for you, to give you what you want in life. Yet, most people use the mind as a misery manufacturing machine that kills a source of creation by overwhelming the mind with; Hate, Resentment, Vengeance, Blame Games, Jealousy, Excuses, Laziness.

  13. #11 Deja Vu… they would have done this to Zambia or any other countries if we had surrendered like our brethren the so-called Red Indians, Aboriginals or the other natives. But we stood our ground and achieved self-determination. But what we have failed is to go beyond Political independence. These lenders will lend billions to the DRC regardless, because the returns are in trillions.

  14. About 10 years ago both Zambia and Ghana rebased their respective curriencies to aprox 5 to the USD…today 10 to 11 years later Ghana is still around 5 to the USD and Zambia’s Kwacha is now at 17 after reaching a whole new high at 23 last year and continues to fluctuate with extremly high volatility even after securing a highly sought IMF bail out agreement.

    Why havent you mentioned the above in your article sir?

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