Ghana’s Economics, Politics and Population

3973 words (16 pages) Essay in International Studies

23/09/19 International Studies Reference this

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Introduction: The Republic of Ghana is a relatively small country, the 32nd largest African Country (238,535km²) representing approximately 10% of the size of Algeria (2,381,741km²) and has a population of 28.83 million people (World Bank 2017) with an average population increase of 2.26% over the last 4 years (Department of Economic and Social Affairs, Population Division 2017). With a current GDP per capita of $1641.5 Ghana is easily classified as a low-income country despite an almost 1000% increase since the 1950s (World Bank 2017). However, it is only over the last couple of decades in which there has been significant increases in GDP per capita with regular fluctuations in its growth occurring from the mid to late 20th century.

This figure shows the peaks and troughs of Ghana’s GDP per capita growth with the biggest decline coming in 1975 with a 15% decrease. This was strongly related to the reduction in cocoa production from the 1960s to 1980s, reducing export revenue and GDP over this period, a period in which, Ghana’s cocoa world market share slumped from one third to one eighth (US Library Of Congress). The peak with regards to GDP growth for Ghana was very much between 2010 and 2011 with the industry sector the main contributor to this rise with a greater than 30% increase in GDP (Ghana Statistical Service (GSS)).

Inequality and Growth: The Gini Coefficient suggests that income inequality in Ghana has worsened since the 1990s with the coefficient increasing from 36% to 42.4$ (0.36 to 0.424) over the last 28 years (HDI 2018). This is reflected in the income share of the top 10% and bottom 10% of the population. The richest 10% have seen an income share increase of 5% between 1986-2012 whereas the poorest 10% lost 0.8% of their share over this time leaving them with only 2% of total income (Index Mundi). Compared to other African countries Ghana does not perform too badly with regards to income inequality as this map shows, it is well below the inequality of South-Africa and Botswana. However, regionally Ghana does not perform so well with its surrounding nations such as Mali and Niger having more income equality. Over the same period at which income inequality in Ghana has worsened, Ghana’s GDP has increased significantly, perhaps indicating that income inequality may be good for economic growth in the short term if the select few wealthy invest into the Ghanaian economy and stimulate development. Other indicators of inequality such as education enrolment show progress for Ghana with 100% of children enrolled in primary education from 2008 onwards, a 28% increase from 1990, with enrolment secondary education also tripling over this period (World Bank 2018). This will benefit Ghana in the future by increasing the skills of their workforce, however, due to their high percentage of exports in labour intensive sectors such as mining, these students may move abroad after obtaining their education in the search for higher skilled labour. As well as this, despite the decreasing student: teacher ratio since the late 1990s, the quality of teaching in Ghana is often scrutinised with the World Bank estimating that under 50% of the children population will be productive in the future.

Ghana

Source: World Bank

Trade: The graph above shows a consistent level of GDP growth post mid 1980s which could be a representation of the introduction of the Economic Recovery Program introduced in Ghana in 1983 to improve the trade structure of the Ghanaian economy. Prior to this date, more profit could be made from illegal trade, starving domestic producers of foreign currency available to purchase capital goods for production (Country Studies.US). Transactions across the black market contributed 32.4% of domestic trade in 1982 (World Bank 1982). Policies were then introduced to reduce this trade such as lowering trade barriers of imports and improving the ease of currency exchange, reducing the costs of capital goods for domestic producers and therefore lowering production costs so that export output could increase. As well as this the Ghanaian government subsidised 95% of production costs caused by trade barriers for goods to be re-exported with the aim of encouraging domestic production which could then stimulate employment as well as trade revenue (Country Studies.US). The introduction of this program was a significant step in the evolution of Ghanaian trade, and the reinvigoration of gold and cocoa exportation which to this day remain Ghana’s two biggest exports. As of 2016, gold represented 57% of total exports with cocoa 18% (OCD 2016). As of 2017 Ghana’s two biggest trading partners were India and China representing 19% and 17% of total exports respectively, in contrast to the 1990’s where Ghana’s exports were predominantly sold to European Countries with Germany and Britain accounting for 31% of total exports. This shift is due to the development of the Indian and Chinese economies over last 3 decades, which have high demand for metals such as coins and pearls all of which can be provided by Ghanaian producers (Trading Economics 2017). Ghana’s most common origin of imports is China, representing 22% of total imports with the UK and US also representing 15%. With regards to their current account, Ghana had been running a consistent deficit since 1995, the greatest being at around $4 billion in 2008, and is yet to reach a consistent surplus despite having a period of positive net trade between 2011 and 2013.

Role of the State: The Ghanaian government has been running a fiscal deficit between 2008 and 2016 as this chart (right) shows, with total expenditure between 20% and 30% of GDP over this period. From 2012-2014 a budget deficit of close to 10% was run by the government yet this seems to be due to falling revenue as the expenditure of 2013 and 2014 is less than that of 2012. If Ghana reached its tax revenue potential such deficits would be reduced, with the IMF estimating a 5% of GDP gap between tax potential and actual tax revenue for Ghana as of 2015. This can be linked to corruption in tax collection which can be a hindrance to Ghana’s development. Pre-2012 the government placed more importance on the social sector such as education and healthcare whereas there has been a clear shift towards expenditure in administration which as of 2015, represented more than half of the governments total expenditure. Furthermore, this seems to have come at the expense of the social sector from close to 15% of total expenditure in 2011 to 3% in 2015, and infrastructure. By reducing expenditure on infrastructure, transportation costs for businesses as well as other revenue affecting factors are not maximised meaning further growth and development in the Ghanaian economy will be harder to achieve. The financing of the fiscal deficit was “mainly using inflows from foreign sources “which totalled 64.4% of total financing (2018 mid-year fiscal policy review). This included Eurobonds; selling government bonds to other countries for native currency, which due to the devaluing of the Ghanaian cedi over recent years (World Bank Data) may not be the best way of financing the deficit with government bonds worth less than previous years. However, government bonds are risk free in contrast to forms of domestic financing making this form of financing more appealing, as well as this, if the government sells government bonds on the domestic market, this may reduce investment into domestic firms, crowd out the private sector and hinder the growth of various industries.

Human Capital: Annual population growth in Ghana has been between 2% and 4% over the last few decades with its most recent growth rate (2.18%) ranking 28th out of all African Countries. Its recent growth could be linked to a lower infant mortality rate over the last 20 years. Although the death rate has decreased over this period, the birth rate has been decreasing at a quicker rate meaning the net rate has decreased from 26.5 in 1995 to 22.9 in 2016 as shown in the “Population Indicators” graph. This reduction in the birth rate is due to increased use of contraception, with the unmet need for contraception (% of married women ages 15-49) decreasing from 35.2% in 1988 to just 26.3% in 2017 (World Bank). The demographic of Ghana’s population has changed heavily over recent decades. In 1970, 46% of the population was aged 0-14 and therefore younger than the working age. As fertility reduced over time the percentage of the population younger than 14 years old has decreased to 43% in 1990 and 37% in 2015 (Demographic Dividend). The United Nations estimates a further decrease to 34% in this age range by 2030. The standard of living in Ghana has improved significantly in recent times, indicated by the increase in its Human Development Index and the improvements in schooling and life expectancy which have caused this, as shown above. Although, a life expectancy of 63 is far behind many developed countries such as the UK which has an 81-year life expectancy, regionally Ghana performs well, with a much higher HDI than that of neighbouring Togo, Ivory Coast and Burkina Faso, although it is still only 140thout of all 189 countries (UNDP). The GNI per capita has also more than doubled over this period reiterating the improved welfare of the Ghanaian population. Although slight, gender inequality regarding human development remains in Ghana, with females only obtaining 6.3 mean years of schooling in contrast to males 7.9 years. Additionally, women empowerment remains a big issue in Ghana. This is indicated by the fact that only 12.7% of seats in parliament are taken by females, a very small proportion when compared to other African countries such as Kenya and Cameroon that have 23.3% and 27.1% represented by women, respectively (UNDP). It is therefore clear that women do not have as much of a role in Ghana in key decision making which affects the Ghanaian economy and could hinder Ghana’s development with less diverse views and ideas amongst parliament.

Source: UNDP, HDI 2018 Statistical Update

Urbanisation: The chart on the right shows a clear increase in the urban population as a proportion of total population representing 55.31% of the total population in 2017. Importantly, the increase in the share of population has increased at a similar rate each year, showing no sign of stopping. The table below shows that only in Greater Accra, Western, Central and Upper West Ghana was there a period of decreasing urban population (1970-1984, 2000-2010). There are many different causes of this. One obvious cause is that of population growth, as mentioned earlier Ghana has experienced consistent population growth over recent years meaning areas of increasing population “are likely to move from rural to urban status” (GSS 2014). Therefore, the biggest reason for the increasing urban population proportion may be due to an increasing quantity of urban areas rather than movement to already identified urban areas. Internal migration contributes heavily to urbanisation also. This is shown through Greater Accra, which has the highest urban population proportion in Ghana and the biggest net migration in the country to a large extent. In 2010 Greater Accra experienced net migration of +1,275,452 people with the next largest only at +282,119 (GSS 2014). With 90.5% of Greater Accra’s population being urban as of 2010, as shown to the left; this migration would have heavily impacted urbanisation in Ghana. This trend in urbanisation is also caused by better access to public services such as healthcare and education in urban areas and the improved standard of living achievable. However, this presents its own issues related to congestion, pollution and excess demand for facilities. As of 2013, there was higher unemployment in urban areas than in rural areas, with the Ghana Statistical Service (GSS) reporting a 1.9% unemployment rate in urban areas in contrast to 0.8% in rural areas. This can be due to an excess supply for labour in urban areas as well as increased competitiveness for jobs, with high quality labour attempting to secure jobs in cities.

Source: Statista 2018

Sustainable Human Development: Ghana has a happy planet index of 21.4, ranking 104th out of 140 countries analysed (Happy Planet Index). It performs especially poorly in life expectancy and inequality ranking 117th and 116th out of 140, respectively. With regards to Ghana’s use of natural resources, as 73% of total exports are represented by gold and cocoa, their utilization seems efficient although the need for specialisation in other produce is clear with it unknown as to how long these resources will be accessible.

 

Bibliography

Websites

  • World Bank Database                                                                                                                                                                           https://data.worldbank.org/country/ghana [accessed 20/11/18]
  • Country Studies: Ghana Historical Background                                                                                                                         http://countrystudies.us/ghana/63.htm [accessed 20/11/18]
  • Country Studies: Ghana’s trade performance                                                                                                                            http://countrystudies.us/ghana/68.htm [accessed 20/11/18]
  • United Nations Development Programme, Ghana                                                                                                                      http://www.gh.undp.org/ [accessed 20/11/18]
  • Ghana Statistical Service                                                                                                                                                            http://www.statsghana.gov.gh/ [accessed 20/11/18]
  • Trading Economics, Ghana                                                                                                                                                       https://tradingeconomics.com/ghana [accessed 20/11/18]
  • Index Mundi Ghana Factbook                                                                    https://www.indexmundi.com/ghana/ [accessed 20/11/18]
  • Demographic Dividend Country Highlights                                                                                             https://www.indexmundi.com/ghana/ [accessed 20/11/18]
  • Statista Country Profiles                                                                                                                           https://www.statista.com/topics/3029/ghana/ [accessed 20/11/18]
  • Happy Planet Index                                                                                                                                                      http://happyplanetindex.org/countries/ghana [accessed 20/11/18]
  • OEC Ghana profile                                                                                                             https://atlas.media.mit.edu/en/profile/country/gha/ [accessed 20/11/18]

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