Why Ghana?s Economic ?Success Story? Is An Imperial Myth
?It is said, of course that we have no capital, no industrial skill, no communications, no internal markets, and that we cannot even agree among ourselves how best to utilize our resources for our own social needs.
Yet all the stock exchanges in the world are preoccupied with Africa?s gold, diamonds, uranium, platinum, copper and iron ores. Our capital?flows out in streams to irrigate the whole system of Western economy. Fifty-two per cent of the gold in Fort Knox at this moment, where the United States?stores its bullion, is believed to have originated from our?shores. Africa provides more than 60 per cent of the world?s gold. A great deal of the uranium for nuclear power, of copper for electronics, of titanium for supersonic projectiles, of iron and steel for heavy industries, of other minerals and raw materials for lighter industries ? the basic economic might of the foreign Powers ? comes from?our?continent.
Experts have estimated that the Congo Basin alone can produce enough food crops to satisfy the requirements of nearly half?the population of the whole world and here we sit talking about regionalism, talking about gradualism, talking about step by step. Are you afraid to tackle the bull by the horn??
— Kwame Nkrumah,?Address to the Conference of African Heads of State and Government, May 24, 1963.
Last week?I?walked in on a conversation between my friends where we live (for the moment)?just outside of Accra, Ghana. ?Ghana?ye hye ? Ghana is hot,? one of them said to me. After some initial confusion (it was a cool day), they explained, ?Pure water sachets are going up to 30 pesewas.?
That?s a 50% increase.
After a quick news search, I found out that from February 1,?a sachet of water will go up from 20 pesewas to 30 pesewas, and a bag of sachet water will sell at 5 Ghana cedis (an increase of 1 cedis 50 pesewas).
I asked them how they were feeling — ?worried? was the instant reply. And then, ?In our own land there is no peace?, ??it?s impossible to sleep at night? and (laughing) ?we?ll have to move to Togo.? My friends are 24 years old and are already fed up of politics and President Mahama and his party?NDC, ?who have presided over an increasing number of price hikes and taxes. In 2010 Ghana drilled for oil, but last year?the IMF forced deregulation and the end of government subsidies and fuel prices increased by 13% in May, 4% in June and 15% in July. If the fuel prices go up, the cost of everything goes up.
Except wages of course.
While doing some research on the price hikes, I stumbled upon?this Guardian article: ‘Ghana?s success story built on gold, oil and cocoa is foundering.’?The journalist gives an account of the protests taking place in Accra and the ?difficulties facing the economy as the country heads towards presidential and parliamentary elections in November?, but also mentioned this:??Once an African success story, built on gold, oil and cocoa, Ghana leveraged its natural resources to produce strong economic growth in the early years of this century.?
This sentence stopped me in my tracks. I re-read it a few times, feeling a growing sense of frustration?at the easy way hundreds of years of often oppressive and defining historical events can be erased in a single sentence; how easy it is to slip into comfortable neoliberal, imperial narratives.
I?believe?it does Ghanaians a huge disservice to place full accountability for their economic, political and societal problems at the feet of corrupt national governance and the autonomy of markets. I feel that?the article has?misplaced what is in fact, a nuanced accountability for the crisis by?failing to look at the historical and conscious international systemic contexts that Ghana exists within. Yes, governance here is problematic, but this?is a problem that is?compounded and perpetuated by external and historical factors.
So, to elaborate on the story, let?s revisit some history and take a closer look at the international system that has contributed to Ghana?s economic problems.
Raw materials and cash crops ? colonialism lives on
The dominant reason for the scramble and partitioning of Africa at the Berlin Conference in 1884-85 was economic exploitation. Namely, as articulated by Jules Ferry, the then Premier of France in 1885:
“To have free access to raw materials of the colonies;?to have ready made markets for the sale of manufactured goods of the?colonizing?countries, and; to?use the colonies as fields for investment of surplus capital.”
During the colonization of Ghana (Gold Coast) in the 1890s, the colonialist agricultural policy was to turn the colony into a producer of raw materials for export and the importer of manufactured goods for consumption. The policy encouraged, educated and advised farmers to produce crops for export and gave little support for small-scale farmers producing food for the local market. Under the Colonial Department of Agriculture, Ghana saw a rapid growth in production of export crops to meet the demands of colonial authorities and expatriate merchants at the expense of non-export crops. Within 30 years of its introduction, Cocoa accounted for over 80% of the country’s exports. Ghana had become a crop export nation and an import dependent economy. For various political reasons, things did not improve for non-export crops?after ?independence? either; colonial policy remained, and the new government?embodied?the ‘modernization and industrialization craze’ as the key to economic development. (Read more here.)
Today, agriculture accounts for approximately 42% of Ghana?s GDP and employs 54% of its workforce. Despite some diversification, cocoa still remains the primary export.?It is this imposed over-reliance on export cash crops and raw materials that has left Ghana so vulnerable to the effects of the plummeting global commodity prices. The export revenues for cocoa, oil and gold declined from $8.2bn between January and September 2014 to $5.8bn just a year later.
This vulnerability is further compounded by the fact that Ghana is still operating primarily as a producer of raw agricultural product (e.g. cocoa, cotton, palm oil etc), which is then transported abroad to be processed. Without the infrastructure to process the products, Ghanaians are forced to re-import the processed results of their raw products back into the country ? much of the chocolate and cotton fabric sold here has been processed elsewhere, transported back and sold at a profit ? which is galling.?Few African countries process their own raw materials ? rather, the value is added elsewhere, for?the benefit of others.
I?ve only very briefly touched on Ghana?s colonial past here ? it?s almost impossible to ever do it justice, but I recommend reading Walter Rodney?s ?How Europe Underdeveloped Africa? for an eye-opening account. To think that Western governments, corporations and elites have ?evolved? beyond colonialism and exploitation today is evidently absurd ? a quick Google of words like ?foreign?, ?exploitation?, resources?, ?Ghana?, will bring up a range of news articles. Despite independence in 1957, the legacy of European colonialism across the African continent lives on and is today joined by neo-colonialism in the form of intervention from the US, China and foreign corporations, particularly when it comes to raw materials.
According to Dr Eric Twum, Chief Executive Officer of the?Institute of Green Growth Solutions in Ghana, the country loses large amounts of revenue?through non-renegotiation of most contracts with multinational companies. He suggests that ?between 2011 and 2012, the country lost about $90 million and $70 million due to stability agreements in the mining and oil and gas sectors respectively.”
Last year Ghana?s former Ambassador to the United Nations,?James Victor Gbeho called on the government to enact a law that would help curb the control of foreigners exploiting the country?s natural resources. Gbeho suggested?that the country had ?lost 95 percent of its tropical forest since independence while very little royalties were paid to chiefs in communities endowed with gold, bauxite, timber, manganese, among other resources.?
I spent some time at Lake Bosumtwi in the Ashtanti region?last year, which is considered?a sacred lake. According to traditional belief, the souls of the dead go there to bid farewell to the god Asase Ya. Because of this, fishing in the lake is allowed only from wooden planks. I was staying nearby and was?told by locals that foreigners had appeared unexpectedly and had drilled beneath the lake?s floor to explore for minerals. Not only had the intervention disturbed a sacred place, but I was told that it?had killed huge numbers of the fish living in the lake, causing huge problems for the local community who depend on?it (This report would seem to back the story up).
Not only are Ghanaians suffering from the effects of neoliberalism and imperialism with the destruction of their environment, they are then also missing out on any much-needed revenue?generated by it. Instead the money resulting from?the?looting of?their natural resources is going straight into the pockets of foreign companies who are focussed solely on making?and repatriating profit.
China?s burgeoning relationship with Ghana has been problematic from the start; not only because there are a huge number of (largely) Chinese?companies operating here illegally, but also because Chinese?investment in Ghana?has caused?the?collapse of Ghana?s manufacturing sector; proliferation of small arms in gold mining cities as a result of illegal mining activities; and increased unemployment due to the export of Ghanaian jobs to China through over-reliance on Chinese goods and services. Oh, and China is certainly not the only country playing this game ? mining by foreign multinationals (as well as local companies I?m sure) displaces hundreds of thousands of people, destroys farm and forest land, and contaminates water supplies and pollutes the air causing disease and poor health.
The problem extends far beyond raw materials too; the desperation to attract Foreign Direct Investment has also left Ghana missing out on much needed finance. In 2008 the European multinational company Vodafone purchased a 70% stake in Ghana Telecom and, under the Sales Purchase Agreement, enjoyed a five year holiday from paying tax to the government. During that period the company made?huge profits, all of which have gone to shareholders while Ghana saw very little, including little improvement to service quality (and in fact Vodafone prices have just gone up).
Ghana and the International Monetary Fund
As with the majority of economically ?developing? countries, Ghana has not escaped the clutches of the?International Monetary Fund (IMF).?Today Ghana maintains a relationship of dependency with the organisation, and by that I mean that the IMF depends on Ghana as one of several countries required to underpin its neoliberal agenda?
One such example of their involvement is the three-year electricity ?crisis? that Ghana is still in the midst of (?dumsor?, or power blackouts have been a daily reality here for the duration). The IMF blames the power cuts on ?lower rainfall on hydroelectric power generations and disruptions to the supply of gas from Nigeria,? but there is much evidence to suggest that the organisation itself is at least partly?responsible. Former UK diplomat Craig Murray wrote last year that Ghana once had ?the most reliable electricity supply in all of Africa and the highest percentage of households connected to the grid in all of Africa?. Murray believes that the success of this publicly owned and run enterprise posed too much of a threat to the neoliberal ideology of the World Bank and the IMF, and so, when Ghana needed some temporary financial assistance (against what he calls a ?generally healthy background?), the IMF insisted that the Volta Region Authority be broken up. This resulted in the separation of electricity into production and distribution and the introduction of private sector Independent Power Producers to the market.
You only have to have spent a few days here over the past few years to know that the situation?is?a disaster for homes, public services and businesses that need a reliable power supply, especially as running a generator is so expensive?(although the supply has seemed to be more consistent this year for those who can afford it?).?According to Murray, there have been more power cuts in the country than ever in its history as an independent state. He claims that in July last year Ghana was producing 900 MW of electricity, which is half of what it was able to produce ten years ago, and suggests that the (mostly foreign owned and foreign financed) private sector Independent Power Producers were providing less than 20% of the electricity generation to the grid, but taking over 60% of the revenues.
To add insult to injury, as part of its loan conditionality the IMF and the USA then?insisted on the privatisation of Electricity Company Ghana (ECG), the state utility body which provides electricity to the consumer and bills them. According to Murray, ?the rationale behind this is that a privatised ECG will be more efficient and ruthless in collecting revenue from the poor and from hospitals, clinics, schools and other state institutions.? Or in other words, collecting revenue and channelling profits straight into the pockets of foreign businesses and banks. I know from living in the UK that the argument that privatising utilities means better service and prices is completely rubbish ? it only profits the rich at the expense of the poor.?(You can read a counter-response to Murray?s articlehere.)
The IMF has just approved a third disbursement of $114.6 million to ?help tackle Ghana?s economic recovery?, which will undoubtedly see the country face further hardship while it tries to meet the IMF?s strict conditionality in order to ?restore fiscal discipline and macroeconomic stability?. In the 1980s, implementation of the IMF?s ?conditionality? saw much needed subsidies wiped and public sector jobs cut while wages were kept low ? under austerity many suffered.
These conditionalities?look like structural adjustment policies, sound like structural adjustment policies and sure as hell smell like them, but no, the?SAP has taken a trip to the marketing department and been?rebranded as a ?partnership?. The?Managing Director of the IMF Christine Lagarde reportedly said herself:
?Structural adjustments? That was before my time. I have no idea what it is. We do not do that anymore. No, seriously you have to?realize?that we have changed the way in which we offer our financial support. It is really on the?basis of partnership.?
?There is always in partnership a bit of hardship to go with it. If the Fund is called upon to help, it is that the country feels that it cannot decide certain things on its own. It needs backup support, financing to make sure that it has access to enough funding to finance itself.?
What IS so generous of the IMF (note the sarcasm) is that is has been considerate enough to offer ?technical assistance and capacity-building? to Ghana with the opening of its fifth Regional Training Center in Accra.?Lagarde?states that the purpose of the center is to?offer ?surveillance? and try to ensure policy that is ?more sophisticated, better adjusted to the new economy, more connected, more balance between the various regions and areas of the world? (Read: to ensure Ghana is behaving itself).
The burden of debt
Ghana is a resource rich country. Aside from vast agricultural production, it also BLEEDS gold. You might ask yourself how a country built upon gold can be indebted to the rest of the world; but it is in debt? to the sum of 90bn cedis (?16bn), which, coupled with an apparent rise in public spending, gives the country a debt-to-gross domestic product ratio of more than 70%.
From the 1970s, many of the newly-independent African governments began to borrow huge amounts of money from rich countries and the Bretton Woods institutions.?Throughout the Cold War such loans were often used as a tool to secure political support from key countries in a wholly non-discriminatory fashion ? corrupt governments and those countries who would surely default (e.g. DRC), were given billions of dollars in credit. In Addis Ababa in 1987 at the summit of the Organisation of African Unity (now the African Union), the President of Burkina Faso, Thomas Sankara, called for a pan-African united front against debt in one of his most famous speeches. He said:
?We think that debt has to be seen from the standpoint of its origins. Debt?s origins come from colonialism?s origins. Those who lend us money are those who had colonised us before. Under its current form, that is imperialism-controlled, debt is a cleverly managed re-conquest of Africa, aiming at subjugating its growth and development through foreign rules. Thus, each one of us becomes the financial slave, which is to say a true slave??
?Between 1982 and 1990, African debt doubled from US$140 billion to US$270 billion. Sankara rightly predicted that this would cripple African development for generations to come. Despite debt relief programs, which have resulted in increased spending on health and education in African countries, Jubilee Debt Campaign estimates that in 2008, low income countries paid over US $20 million a day to rich countries.?
Today?s?debt crisis in Ghana is unsurprising given the scale of lending to them still taking place and their dependence on fluctuating commodities.?However, this debt is further compounded by the?devaluing of Ghana?s currency which, in turn increases the real size of its?debts.
Debts owed outside the country are valued in dollars or other foreign currencies, so a fall in exchange rate will immediately increase the relative size of debt repayments in domestic currency ? a big risk of borrowing in foreign currencies. Even money lent by multilateral institutions like the World Bank and other governments carries this risk because the loans are given in dollars ? even though they claim they are ?risk free? with a low interest rate of around 0.5% for the most impoverished countries.
According to the Jubilee Debt Campaign:
Between 2004 and 2013, Ghana was lent $2.8 billion by the World Bank, which totalled 3.8 billion Ghanaian Cedis. However, the fall in the Ghanaian Cedi now means that, based on current exchange rates, Ghana will pay back 12.8 billion Cedis, three times more what was lent. The effective interest rate Ghana is now paying on these World Bank loans is 9%.
Source:?Jubilee Debt Campaign.
The same applies to loans given to Ghana by foreign private financial markets, through bonds usually issued under English law. In 2013 Ghana borrowed $750 million through a 10-year bond in at an 8% interest rate. Due to the real cost payments increasing with the fall in exchange rates, the Jubilee Debt Campaign calculates?that the effective interest rate for Ghana on these bonds is now 27%.
Once again Ghana, which spent over 30% of government revenue on debt payments in 2015, is at the mercy of the IMF, which ?came to the rescue? in April last year with a $US918m three-year assistance program to enable these debts to be paid. Essentially the program equals more debt?and a hell of a lot of pressure on the government to create increase austerity within the country and to create the right conditions for external market forces.
It?s important to recognize that the costs of the commodity price and exchange rate falls are being borne by the people of Ghana and citizens of other countries in similar positions, and not by the lenders, whether that be the IMF, World Bank, private speculators or others. Economic growth will not improve things for Ghanaians ? in general those countries heavily dependent on foreign lending grow faster than the average for low income countries, but they make less progress on reducing poverty and inequality is increasing, as this report from the Jubilee Debt campaign demonstrates.
A legacy of colonial leadership
My intention with this article isn?t to remove accountability or blame from the Ghanaian government completely ? they are heavily indebted to a whole range of organisations, and within the seemingly narrow hallways of power they have been afforded within a system deliberately designed to limit power, they have made some terrible decisions. In fact, the Ghanaian government seems to share many of the incompetencies, failings and self-interests of the government of their former ?colonial masters? ? in December last year the Ghanaian transport minister was forced to resign after it emerged that the government had spent 3.6m cedis painting pictures of President Mahama and other former leaders on buses. Reports of Mahama?s government lavishly rewarding officials with houses, cars and fuel on top of generous salaries feels as horrifying to me as when we discovered the British expenses scandal.
I?m loathe to patronize Ghanaians ? they certainly do have the autonomy to select their own government. I can?t believe that there?is no one?that could do a better job than the NPP or the NDC, but then again I also can?t believe that a majority of voting Brits could elect David Cameron and his blood-sucking, Eton romping, austerity wielding, old boys club ? apparently anything can happen, and people are misguided and manipulated in myriad ways.
From slavery and colonialism, to independence and the forcible removal of former leaders, to today; Ghana has contributed immeasurably, at great cost, to boosting the coffers of Britain and its counterparts.?In his address on the eve of Ghana?s independence, Nkrumah pointed out that of ?124 million spent during the course of the Five Year Development Plan, the CPP internal self-government had only received ?1.5 million in aid from Colonial Development and Welfare Funds, despite Ghana?s vast contribution to the gold and dollar resources of the sterling.?He elaborated:
?The Gold Coast has contributed, on an average, 25% of the net dollar earnings of the British colonial territories, and, taking into account our contribution of ?around ?9 million a year in gold, in the five years from 1951 to 1955 in which the CPP have been in power, the Gold Coast contributed a net positive balance ?of ?150 million to the gold and dollar reserves of the sterling area. It will be seen therefore, that though the Gold Coast is small and, by Western standards, not a very wealthy country, it has made a significant contribution to maintaining the stability of? the sterling area.?
Nkrumah was a leader not without problems, but he was a socialist who loved his country and a pan-Africanist who stood up to imperialism and Western dominance until he was overthrown by a military coup in February 1966.?There is much evidence to suggest that the United States of America was complicit in the coup, led by Emmanuel Kwasi Kotoka and the National Liberation Party ? it was certain a welcome outcome for Western powers.?In a memo from?the United States President?s Deputy Special Assistant for National Security Affairs (Komer) to President Johnson in 1966, he wrote:
?The coup in Ghana is another example of a fortuitous windfall. Nkrumah was doing more to undermine our interests than any other black African. In reaction to his strongly pro-Communist leanings, the new military regime is almost pathetically pro-Western.?
Unsurprisingly, shortly after Nkrumah?s removal Ghana realigned itself internationally cutting ties with Guinea in favor of those with Western countries and allowing the IMF and World Bank to take a lead role in managing the economy.
So, is bad governance?really surprising?when Ghana has faced?attempts to limit autonomy, self-determination, self-reliance?and powerful leadership at every stage of its ?modern development??
Today the system of governance here, like the majority of national government systems across the globe, is incompetent, at least partially corrupt, self-interested and unwilling to stand up to big business, imperialism and neoliberalism. Africa has a legacy of creating great leaders who are thwarted by Western intervention and?it is a sad state of affairs that Ghana, like many other countries once under colonial rule, has seemingly been forced into a self-perpetuating cycle of bad government after bad government. It seems that the collective way of operating is?kowtowing to carefully marketed Western doctrine, allowing multinational corporations to eat up the country in return for a quick fix or a quick buck and putting self-interest and ?economic growth at all costs? first at the expense of citizens, traditional values, pan-Africanism and humanity. What?s worse is?that I know most of you will be able to see these traits reflected in your own national governments as I can in mine ? where?the pursuit of ?growth? and of ?more??is leading us all.
To frame Ghana as a ?once African success story? begs the question; successful for whom? Ghana is a country that has forever been considered ?developing?. It?s poor. Since it began its relationship with the West it?s gone from slavery, to colonialism, to neoliberalism; with poverty and inequality consistent themes throughout. The only people who have truly benefited from its gold, oil and cocoa are foreign governments and companies. Ordinary Ghanaians have seen little?benefit from strong economic growth.
To call Ghana a ?failure?, is also a misnomer, because actually it?s still doing exactly what it was designed to do, very successfully. If you rub off the sheen of ?independence?, underneath is a country very much allowing largely free access to its raw materials, offering ready made markets for the sale of manufactured goods of foreign companies and allowing investment of surplus capital (to be repaid with interest).
A truly successful Ghana would be a Ghana bolstered with reparations for the many damages done to its economy, its people and its resources, one that is able to exist within an international system of true equality and respect, where foreign companies and countries follow the rules instead of making them and where Ghana is allowed to invent itself however the people decide ? free from the shackles of neoliberalism, imperialism and being developed?in the Western image, for Western benefit.
I?m not here to tell Ghanaians what they should be doing or how they should be doing it ? there are enough people doing that. What I hope for with these words is to encourage those of us in the UK and in the Western world; who read articles like this one;?believe in the narrative that tries to hide the fact that poverty and inequality are created; and disconnect ourselves and our lives from playing any part in it; to ask questions?of these these stories. Our governments, our money, our history, our silence are all implicated in the poverty and inequality of others. Are we really surprised by the economic misfortune of a?country deliberately constructed to serve foreign interests? Why is its success measured only by economic growth? How is poverty created? Who?s developing whom? Why not connect the dots?
Elsie?Bryant?is the founder of?Development Truths, a blog that?presents a frank and honest discussion about International Development in today’s world. Follow her on Twitter.