Ghana: Star Track?

Courtesy of The Financial Times, a look at Ghana’s growth and future potential:

By all measures – Ghana, with its gold and oil wealth, stable government, and double digit growth, can be considered an African success story.

However, as an FT Special Report on Thursday pointed out, the country also faces its share of challenges. Heavily potholed roads and containers stacked high in tightly-packed Tema port attest to Ghana’s difficulties in handling break-neck growth. And in spite of the boom, that growth has not translated into job creation nor development such as education.

Ghana’s growth spurted from 2007 when a small US company founded the Jubilee oilfield 60km offshore. The quantities discovered so far are not on a par with Africa’s biggest producers, but there is potential there for much more than the 2bn or so proven barrels.

“Jubilee has set a good example for the rest of Africa. A lot of people who said oil would be a curse have been proved wrong,” says Aiden Heavey, CEO of Tullow, operator of the oilfield.

But Joe Abbey, a former finance minister who runs the Centre for Policy Analysis, an independent think-tank, describes the country’s impressive growth (13.6 per cent this year) as “jobless.”

Government borrowing is still crowding out the private sector, bank lending rates are prohibitively high and the feel-good factor that the first year of oil production was expected to bring has yet to materialise. As one Accra-based banker put it, growth has outstripped development in almost every aspect of Ghanaian lives except telecoms.

Record production of other natural resources such as cocoa was thanks, not to increased labour and land use, but to improvements in yields (and some smuggling from the Ivory Coast).

Part of the problem is political in-fighting and bickering among various governmental institutions that is slowing the pace of change, even to a point of delaying the development of infrastructure necessary for gathering the natural gas associated with its offshore oil.

The delays are thwarting the creation of employment, despite the fact that gas, more than oil, has the potential to deliver thousands of jobs through increased production of cheaper electricity.

“There has to be a way that people see a direct benefit from the energy industry that is changing our existence,” says Nana Awulai Amo Adjei, a local chief lobbying for his community to be given an equity stake in a gas plant near Bonyere on the border with Ivory Coast.

As a rising economic performer, Ghana is also the source of much Chinese, American and, to a lesser extent, European interest.

Ghana has agreed the terms of a $3bn loan from the China Development Bank that would finance, among other things, the construction of gas infrastructure by China’s Sinopec. The loan is guaranteed by future oil production but potentially breaches the terms of Ghana’s International Monetary Fund programme which limits commercial loans to $800m a year.

The question then, is how can Ghana break through to the next level – maintaining its red-hot growth while making sure its citizens aren’t left on the side of the country’s road to stardom?

This entry was posted on Sunday, December 18th, 2011 at 11:40 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

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