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About Ghana
The Republic of Ghana is often held up as a turn
around success story by many western economists. In
the last decade the country has stabilized itself
following almost twenty years of political strife
and economic stagnation. It, like so many other
African nations, is blessed with natural resources
that have enabled it to carve out a shaky nitch for
itself in the competitive international market
place. As the country continues to adhere to
capitalist free-market doctrine it is still fighting
the legacy of underdevelopment that British colonial
rule imposed upon it. Ghana is actively courting
foreign investment to counter the trend of
decreasing levels of international aid in order to
diversify its primary industry base which suited the
British and the core of more recent investors.
Great Britain long reigned as the most powerful
nation in the world and its interests in West Africa
comprised the territories of Gambia, Sierra Leone,
Gold Coast (Now Ghana following its independence)
and Nigeria. The strength of Britain's economy was
based in consumer and industrial goods, and it
relied upon its unrivaled navy to enforce and
protect its vital trade routes. Industrial Britain
was dependent upon markets for its products and raw
material sources to fuel its industrial base.
British manufacturers attempted to control all
aspects of production and in doing so British
colonial policy saw the benefits of a large empire.
The žJewelž of the British empire was India and
British colonial policy was primarily concerned with
the protection of the important route to India.
During the colonial period British trade and foreign
policy were virtually undistinguishable because of
the need by British producers to not only fueled
their factories with foreign resources, but also to
create new markets for their products and develop
areas for their capital to move into. In short, a
global economy was created by the British in which
political dominium was exercised over very large
areas such as Ghana.
Colonialism was developed in to an art form by the
British deriving its ideology from a number of
nineteenth century British theories:
evangelical Christianity and social Darwinism, and
on the other side free trade and laisser-faire.
Ghana fit in to the British scheme of things by
acting as an open economy where free trade,
bolstered by the pound, ruled. The British did not
become grossly involved in the inner workings of
Ghana and instead continuously stressed the
importance of increasing trade to move the country
along further. However, because the British did not
substantially invest in those parts of the
infrastructure which were not tied to the short run
profit derived from trade, Ghana remained
continuously underdeveloped.
When in 1957 the British did finally withdraw from
Ghana its people were left to assemble the pieces of
a newly independent nation which were completely
dependent upon the external trade of a select few
commodities. Although it traded its raw materials
it did not have the ability to consume or even fully
manufacture them. In exchange for exports Ghana
imported manufactured goods from abroad, chiefly
consumer goods.
The government relied heavily upon duties levied
upon external trade for revenue. The high
percentage of raw materials exchanged for imports,
and the dependence of public revenue related to such
trade practices, left the economy unable to invest
in projects to diversify its economy and enable it
to maneuver to a more stable position. Naturally,
finished manufactured goods are more expensive than
raw materials and thus the Ghanaian government is
constantly fighting an uphill battle. To compound
the problem further, Ghana is so reliant upon its
raw material exports that a change in the world
demand for the products results in economic peril.
Today Ghana finds itself in an only slightly better
position and is classified as a peripheral
capitalist economy. It is unable
to completely shake the weak manner in which its
economy was structured by the legacy of
underdevelopment of its capitalist potential during
the British colonial period.
Ghana has a rich history of trade with Europe dating
back to the 15th century when Portuguese traders
rented land from the dominant tribes in the region
and built trading forts. Trade accelerated at such
a rate that the country accounted for more than
one-tenth of the worldžs gold supply by the end of
the 16th century. British traders quickly
recognized the countries potential and became the
main presence in the country by the 18th century.
They declared the Gold Coast an official colony in
1901, following the defeat of the ruling Ashanti
tribe after they had taken the side of a rival
tribe, the Fanti, to prevent the highly organized
Ashanti nation from trading with other European
countries. The Gold Coast became one of the most
successful European colonies, in terms of trade, and
a substantial amount of capital was invested by the
British into the infrastructure of the country in
the forms of railways and ports to exploit the
countries riches.
In 1957 Ghana became the first independent African
country when the United Kingdom handed over control
of the country to the democratically elected
Convention Peopležs Party (CPP). Between 1957 and
1983 Ghana was pulled from side to side by differing
political ideologies in the form of nine different
governments and four military coups. The last coup
occurred in 1979 when the current President, Jerry
Rawlings, took power. In 1992 the country held free
and fare multiparty elections for the first time
since 1972. The incumbent Rawlings, although
accused of "erratic and authoritarian behavior",
won.
Following independence Ghana was seen as a country
with a bright future. It was the largest producer
of Cocoa in the world and boasted profitable timber,
mining and manufacturing sectors. Like so many
other developing nations Ghana later fell prey to
the dependence it had placed in the select
commodities that provided it with an economic base.
When the world price of Cocoa collapsed the
countries deficit subsequently soared and the
economy languished.
Today, following two decades of economic decline,
Ghanažs economy is being heralded as a model for
African development. Between independence in 1957
and 1983 Ghanažs economy was in general decline as
world bank figures indicate with GDP growth
decreasing from an average of 3.4% in the 1960s to
1.3% in the 1970s. In 1979 inflation was at 120%
and the country was seen as yet another African
country with rife corruption and mismanagement. By
1992 following the privatization of more than 50
state owned businesses, and battling inflation down
to 10% the country is a bright spot amid notably
murky political waters in the region.
The government is actively promoting Ghana as a
country ready for U.S. investors with the hope of
permanently stabilizing the country with the free
market system. In a speech during his 1995 official
visit to the U.S. Ghanažs president spoke of a
vision for Ghanažs economy as žimbibed with the
attributes of democracy, the rule of law and with
political pluralism.ž Further, the government is
aiming, under such free market policies, to be able
to reach 8% Gross Domestic Product (GDP), reducing
the current yearly population increase from 2.7% to
2% and decreasing the alarming 30% unemployment rate
which has plagued policy makers.
Foreign investors are looking to Ghana because they
are encouraged by the governments proactive stance
on attracting investment. For example all foreign
initiatives are guaranteed a turn around of no more
than three months upon issuance to the government of
Ghana. European investment and particularly
British, is strongest in Ghana with examples in
steel and coca production facilities, but the U.S.
is also moving in with Coca Cola looking to invest
in the soon to be privatized bottling plant of Ghana
National Trading Corp.
Of particular interest to foreign investors is the
Ghana Stock Exchange which began trading in the 4th
quarter of 1990 and is open to foreign investment
with a 10% withholding tax on dividend income. The
stock exchange shows a true development in the
creation of the much needed capital market in
Ghana. The shares quoted on the stock exchange
constitute the most profitable sectors in Ghana,
namely oil, mining, tobacco, and plastics. The
Ghana stock exchange began operation concentrating
in the areas of corporate equities, bonds, and
government securities. In 1994 the stock market was
further strengthened following the successful
privatization of Ashanti Goldfield Corporation.
Other recent improvements in the Ghanaian economy to
attract foreign investment include:
- Bank deregulization
- The Ghanaian central bank introduced a floating
exchange system which allows foreign investors to
hold foreign exchange with which ever bank
they want. This allows investors to more easily
extract their profits from the country.
- The recent creation of the Ghana investment
Promotion Center which strives to assure foreign
investors that Ghana is an environment in which
investors will: Receive profit repatriation, that
property will not be repatriated, and foreign
exchange can be freely moved.
- The government recently allowed foreign investors
to explore and exploit the countryžs geological
resources. This is of particular interest to many
investors because annual production in Ghana's gold
mines places the country as the second largest
producer in the continent after South Africa.
A clear indication of British colonial influence in
Ghana can be seen in its weak educational system
which is based along the same lines as the British
system. However, unlike Britain, Ghana is cursed
with appallingly low literacy rates. Currently
adult literacy only averages 40% which is below the
Sub-Saharan average of 50%. Equally as alarming is
the disparity in school attendance between gender
with 77% of boys and only 38% of girls attending
primary and secondary schools. These figures are
not appealing to foreign investors who are seeking
work forces that are educated and trainable. The
government of Ghana is attempting to rectify the
situation, which it recently outlined as a major
concern in its report "Ghana Vision 2020".
Although in the last ten years Ghana has
substantially turned its economy around by reversing
GDP from negative to positive figures the rates are
not high enough considering its 2.7% population
growth rate which is currently increasing. World
Bank estimates claim that at the current rate it
will take Ghana 50 years to become a middle-income
country. The same World Bank report goes on to
state Angolažs situation very well:
The arithmetic of growth is thus very clear.
Without a substantial inflow of foreign direct
investment, Ghana cannot
achieve its target of becoming a middle-income
country by the year 2007 (the 50th anniversary of
its independence).
The government thus has to prepare an enabling
environment to attract this investment...Equally
important, and especially
so in light of the new democratization, there
has to be public education and debate about foreign
direct investment, in the
context of a society where this has
associations with colonial exploitation.
Today Ghana's colonial ties to the United Kingdom
continue. Britain is still Ghana's major import
source and export destination (41.4% and 27%
respectively) levels much greater than any other
country in West Africa. The country, while posting
impressive figures for Africa, is still lagging
behind when compared to other emerging economies in
Asia. Much, although not all, of Ghanažs economic
woes can be attributed to its former colonial ties
and the debilitating start to international
competition that it encountered.
Ghanažs gold sector provides a good example of the
countries continued reliance upon a select few
commodities and the importance of foreign investment
to not only enhance exports of those commodities,
but also to protect the countries environment.
Ghana has been a producer of gold since the 16th
century and today boasts one of the largest and
richest reserves of gold in the world. The Ghanaian
gold mining industry is a relative success story in
the governmentžs attempts to turn the fledgling
economy around. The sector followed the countriesž
general trend of economic stagnation during the
1970s and by the early 1980s was starved of foreign
investment to modernize and improve output. However,
following the governments policies of market
liberalization aimed at increasing foreign
investment the industry was turned around and in
1992 output exceeded 1 million oz.
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