Ghana – which way now?Ghana – which way now?Bob Digby

Senior Vice-PresidentGeographical Association

Ghana @50: Success or failure?Ghana @50: Success or failure?

Frank Agyekum "Ghana has done well. It’s a thriving democracy with a stable economy; kids go to school and are fed.”

Samuel Ablakwa "So many kids are still

on the streets hawking. I'm still carrying buckets of water on my head! Maybe our economists are cooking the figures."

Some background

Size: 230 000 km2 (nearly that of the UK)

Population: 24.9 million (about 40% of the UK’s)

Scale: 0 100 miles

Focus for tonightFocus for tonight

How far has Ghana come in 50 years?

How far can Ghana be considered ‘independent’?

Which way should it go from 2011 onwards?

Economic progress?Economic progress?

1987 2010

GDP total (US$ - PPP)

US$5.7 billion $31.08 billion ($62 bn at PPP)

Per capita (US$) $385 $1250 ($2500 PPP)

Annual GDP growth rate %

5.3% 5.7% (previously 6.2%, 8.4%, 4.7%)

Annual Inflation %

39% 11%

Unemployment % 26% 11% est.

Exports $863 million (Cocoa 60%, timber, gold, tuna, bauxite, and aluminum)

$7.5 billion (Gold, cocoa, timber, tuna, bauxite, aluminum, manganese ore, diamonds, horticulture)

Main export markets

US 23%, EU countries 25% EU countries 40%, Ukraine 6%

Imports $783 million (Petroleum, consumer goods, food, capital equipment)

$10.7 billion (Capital equipment, petroleum, foods)

Main import sources

US, EU, Japan, South Korea China, Nigeria, EU, US, South Africa

Total Debt (US$) $3.3 billion(400% of export value)

$6.7 billion(64% of export value)

• Trade pattern (typical of a developing economy) has barely changed in 100 years• Primary product exports dominate • Imports remain mainly manufactured goods • An example of dependency theory: developing countries remain dependent upon developed nations for trade.

Key economic issuesKey economic issues

Social progress?Social progress?

1987 2010

Population in millions 13.9 24.8

Population growth rate per year

2.9% 1.8%

Birth rate per 1000 42 27.6

Death rate per 1000 10 8.8

Infant mortality per 1000 live births

68 48.5

Life expectancy at birth in years

59.5 61

Fertility rate per woman 5.6 3.5

Literacy of adults 30% 58%

Ghana’s cocoa tradeGhana’s cocoa trade

Colonial times: Ghana the world’s largest producer of cocoa Britain dictated the global cocoa price

2010: the world’s second largest producerWho controls Ghana’s cocoa trade now?

Who controls trade? 1Who controls trade? 1

Upward pressurePrice of cocoa decided in commodity

trading exchanges in London and New York Buyers buy cocoa for companies e.g. Cadbury

or NestleTraders compete for supplies Cocoa prices depend on global supply and

demand, which vary

Downward pressureOther countries produce cocoa e.g. Ivory

Coast now the world’s largest producer If Ghanaian prices are too high, dealers

purchase elsewhere

Global price patternsGlobal price patterns

Global price of cocoa is volatile

1991-5: the price of cocoa changed 60 times

1996-2002: it changed 90 times

Between Jan 1991 and Dec 1993 it increased by 112%

Between June 1998 and Dec 2000 it fell by 32.5%

Cocoa price 1971-2004

Cocoa price Sept 2007-Jan 2008

Impacts upon people?Impacts upon people?

Unstable prices cause:irregular income for workers low tax returns for government poor government planning.

Why not market Ghanaian chocolate? Why not market Ghanaian chocolate?

Sustained chocolate consumption

Western Europe & US are biggest markets; Asia, E Europe & Latin America growing rapidly

Consumers react badly to high prices or shortages

Very strong response to FairTrade brands but not to unknown brands

Opportunities for Ghana to market its own chocolate are few.

Dependency theoryDependency theory

Poverty in developing countries caused by a reliance on developed economies

Trade in primary goods keeps countries poor, because no value is added by processing or manufacturing.

Therefore, no jobs & profit for investmentCountries trapped in a vicious cycle

Development TheoryDevelopment Theory

Andre Frank’s ‘Development theory’ Colonialism causes low levels of development, Keeps colonies poor Tariffs (duties) on imported manufactured goods

used to protect from cheaper imports

In 2011EU Import tariffs on cocoa

beans are lower than on processed cocoa.

EU uses 'tariff escalation'0% duty on imported raw

cocoa beans7.7% on cocoa powder 15% on chocolates Japan & USA – no duty on

raw cocoa beans but tariffs of up to 65% on imported chocolate

Who controls trade? 2Who controls trade? 2

Who controls trade? 3Who controls trade? 3

WTO (World Trade

Organisation)Ghana joined the

WTO in 1995 Previously,

subsidies paid to farmers to grow food

WTO policy – abolish subsidies, develop free trade

WTO ‘Agreement on Agriculture’WTO ‘Agreement on Agriculture’

Allows ‘domestic support’ for producers.

Three categories: Green, Amber and Blue.

Green – subsidies for environmental reasons, e.g. if farmers reduce grain output and plant woodland;

Amber – subsidies that governments have agreed to reduce but not to cut.

Blue – subsidies given where production will be reduced in the long-term.

Impacts

EU and USA still subsidise farmers $400 billion annually

50% of EU subsidies go to largest 1% of producers

70% of US subsidies go to largest 10%

Large farmers produce huge volumes, which governments buy and ‘dump’ on poorer countries as ‘aid’

Impact of WTO PoliciesImpact of WTO Policies

Reduced domestic prices

Farmers put out of work.

Ghana’s tomato-growers can’t sell produce, as EU tomatoes are cheaper

Canning factories closed

Rice growers also flooded by imported rice from the US

Where next? Where next?

To develop, countries seek a virtuous cycle whereby they keep surplus production, and invest in processing and manufacture, adding value.

Many cocoa farmers now form co-operatives.

Kuapa Kokoo (‘good cocoa farmers’) began in 1993; now has 40 000 members, producing 1% of global crop.

Strong bargaining power, selling to European FairTrade companies.

1998 The Day Chocolate Company formed in UK, making ‘Divine’ chocolate.

Provides members with cheap loans, improved drinking water in rural areas, & health insurance.

How to develop in future?How to develop in future?

Aid or investment? Supplied mostly by

western countriesWealth created by

employment in construction, manufacturing or developing primary products.

Wealth ‘trickles down’ via job creation, spending and increased demand.

Known as the ‘multiplier effect’

Top down or bottom up?Top down or bottom up?

Top-down:Occurs where

strategic decisions are needed, about e.g. improving health care or schooling or infrastructure (e.g. provision of energy).

Decisions come from above

Imposed on communities

Useful for major projects

Bottom-up : Occurs at community

level by identifying people’s needs

Develops small-scale projects to meet needs

Decisions and working come from communities and by NGOs (Non-Governmental Organisations) e.g. charities

Aid or investment?Aid or investment?

Aidgifts or repayable loans made by one country or

organisation

Investmentrepayable loans used to develop a country, with a share in the profits e.g. when TNCs invest in a

factory

Bi-lateral From government of one country to another

Multi-lateral

From alliances of several countries or organisations

Tied Given with conditions about how money must be spent e.g. drugs, weapons, or a particular project

Case Study: the Volta DamCase Study: the Volta Dam

Built 1961-66 from both aid & investment

Multi-lateral – World Bank (loans – US$40 million), Ghanaian government (investment – US$69 million) & aid from USA and UK governments.

Akosombo Dam created Lake Volta, the world’s largest artificial lake.

Designed to provide HEP for smelting raw bauxite into aluminium

BenefitsBenefits

Energy Electricity production Cheap electricity for aluminium smelter, expanding industry Aluminium export trade Electricity exports to neighbouring countries

CommunicationLake Volta provides an inland waterwayLinks the northern region with the more prosperous south.

Economic activity and the environmentIncrease in tourism; cruises. Source of irrigation water.

Problems Problems

National scale Most Ghanaians can’t afford electricity Aluminium smelter moth-balled in 1998 HEP plant owned by ALCAN, a US company, so profits go to US, not

Ghana. The lake flooded 4% of Ghana’s land forcing 80 000 to relocate.

Local scale Reduced river flow downstream Reduced freshwater shrimp, so

local people have less protein. Less silt downstream, reducing

crop yields and incomes. Removal of trees to sell as

fuelwood to replace income – causing deforestation

Increase in water-borne disease, e.g. bilharzia, malaria

Increased rural-urban migration

Benefits for Ghana?Benefits for Ghana?

ALCAN,

USA

Kaiser Aluminium, US

Formed VALCO

Fate

Bauxite √ (80% share) & Ghana (20%

share)

Exports Ghana’s raw bauxite to Scotland & Canada

Electricity √ (2 HEP plants)

Aluminium smelter

Smelter

at Tema

Imported semi-processed alumina from Jamaica & US

1998 – closed & left it mothballed

2007: sold to Ghana for US$18 million

Time to forge ahead?Time to forge ahead?

2005: Ghana’s government bought 90% of shares in VALCO smelter from Kaiser, hoping to re-start it

2006: Production started2007: Ghana purchased the remaining 10% 2008: Plant closed because of low water

levels in Lake Volta caused by drought preventing electricity production

2009-10: Low global prices of aluminium and bauxite kept it closed

2011: reopened with 1 of the 6 smelters working

Is there future hope?Is there future hope?

Ghana was one of the first countries to have many of its debts cancelled after the 2005 G8 conference

In 2006, this saved Ghana US$166m

in interest aloneInvestment by the government in

people and the economy possible

Debt cancellation took place on condition that all savings spent on improved education and health care

Joined-up thinking?Joined-up thinking?

Ghana’s Needs Safe Water 2008: only 50% of Ghana’s

population had access to safe, treated water

60-70% of urban dwellers have access but only 35-40% in rural areas.

Even in urban areas, only 40% have a water tap that flows

Affluent Ghanaians buy from private sellers because public supply is so irregular

78% of the urban poor have no piped water.

A Millennium Development Goal – to bring clean water to all by 2015

The World Bank says Water treatment must not

lead to increased government expenditure or debt

Loans for water systems only if they are privatised

People now have to pay for connection and supply – which many cannot afford.

Jobs are threatened as the new owner cuts costs & maximises profit.

Plans are to privatise only the urban water and sanitation systems.

What happens to rural water supplies?

So who’s in charge?So who’s in charge?

54 years since independence

Loss of British control Debts mostly

cancelledRapid economic

growth caused by global commodity prices

Greatly improved social indicators

Several targets still ahead – e.g. water

Has spent most of that time in debt

Control of the country’s largest development projects in the hands of the USA

Future development influenced by the US-controlled World Bank

China seeking to influence Africa – and its resources

What change lies ahead for them?What change lies ahead for them?

AcknowledgmentsAcknowledgments

Thanks to the following; all images are for educational reference and use only

Photos from Ellie Doidge

Images and references ‘A2 Geography for Edexcel’ (2009) Oxford University Press)

CIA Factbook for Ghana 1987 and 2011