Ken Ofori-Atta
This paper is about investing in Africa's emerging markets, about the regulatory changes that have occurred and difficulties investors face. Some of the changes are: foreign exchange controls have been decentralized, currency redenominations have occurred, inflation targeting as a monetary policy tool has been adhered to, privatization continues without the previous history of violent protest. In the capital markets, security exchange commissions are stronger and credible. Circuit breakers have emerged in certain stock markets and to facilitate credit, credit reference bureaux are being established and regulations for microfinance institutions have been encouraged to facilitate the deepening of the financial industry. There is a positive and welcoming attitudinal shift. But the kernel of the story is different and much more profound than these mechanical changes.
And that is why I have labelled my talk with a quotation from Pliny the Elder - a Roman Historian who said:
Ex Africa Semper Aliquid Novi,
Out of Africa always something New!
Let's see whether we can discover something new from Africa in this period of global financial crisis.
Africa's GDP growth rate has stabilised around 5.7% in the past decade; dropping dramatically from a projected 6.4% in 2008 to 4.9% and for 2009 it is expected to drop further to 2.4% or maybe more. So we too are obviously facing a crisis and we cannot keep denying it. Though this is still double the expected growth rate in the West, it is regrettable because we should be growing at over 6% if not for the global credit crunch.
We have not seen such massive destruction of wealth in the history of modern civilization and I might add also such rapid recreation of capital in the past year. Africa is truly astounded at how quickly the West can mobilize to save their companies when a fraction of those amounts could reinstate the impressive growth trajectory which Africa had achieved.
My contention, however, is that Africa has never been better prepared for such a debacle. The past decade has seen a marked improvement in capital flows to Africa - the natural resources have always been there, so it is the economic growth, political stability and Africans reinvesting in their economies that has bolstered this. Examples from Ghana and Tanzania illustrate this turn around. Tanzania's Mkukuta development strategy has yielded FDI of 4% of GDP.
While Ghana which had averaged $28 million per annum in the past two decades had US$1.35 billion in 2008, even if you sanitize it by Vodafone's US$900m privatization transaction, you have a tidy US$ 435 million of FDI. I believe that already in 2009 some US$500 million has been registered.
In Senegal, President Wade's Investment Promotion Center is within proximity of the Presidency and his foreign trips are 70% commercially driven. Senegal is also closely following the Tamasek model of Singapore as it looks to build for the future.
Ethiopia - has branded its coffee as it seeks to capture as much of the retail price premium as possible. We know this can be significantly more but more importantly like Ghana's cocoa it stabilizes her prices. African governments are responding in a more competitive and market driven way.
Long term investors and partners for Africa should acknowledge the following changing investment contours of our land:
Improved Democratic Principles
- Politicians are more receptive to the private sector and market driven principles - Politicians give up power in properly run polls
- In Ghana, the political parties actually signed MOUs with the Association of Industries on the run-up to the elections
Sustained Economic Growth and Stability
- Good governance and fiscal prudence are common place - Expected growth rate in 2009 to be double the global growth rate
External Push Factors
The emergence of Sovereign Ratings has forced the ministries of finance and Central banks to be more sensitive to market principles. A number of countries have responded by issuing bonds on the International market. Both Ghana and Gabon have the following: - Ghana US$750 million (8.5%) - Gabon US$1 billion (8.2%)
While the following countries have postponed: - South Africa US$1 billion (Due 2012)
- Seychelles US$200 million (defaulted) - Tanzania US$500 million (postponed)
- Uganda US$1 billion (postponed) - Nigeria (postponed) - Zambia (postponed)
In addition new programs such as the MCA, AGOA, APRM have created more transparency and responsiveness to better governance. This is further consolidated by our entry to the International bond market.
All these create a discipline, predictability and narrows the information asymmetry which has dogged Africa in the past, but now enables you and I to transparently 'derisk' the continent. So the question really on this broken record Is this: Is this a matter of sheer stereotyping or is it unwillingness on the part of us professionals to do our work (difficult though it might be) to bring the story to our investors.
I believe that the most transformational actor in Africa's newness is the emergence of African Entrepreneurs. They have set us on an 'irreversible' path of modernization and confidence. They are well educated, they have international experience, they are well connected, they understand the world of finance and they are confident. Not unlike the Indians in Imagining India by Nilekani, these entrepreneurs are precocious and as Friedman says of Indian entrepreneurs , they are replacing the low aspirations and failed economic ideas with 'their own high octane energy and boundless aspirations'.
In Africa you can now talk of super Entrepreneurs such as Mo Ibrahim, Dangote and Tokyo, while we have an impressive critical mass of younger entrepreneurs such as Ali Mufuruki of Tanzania; Isaac Shongwe of South Africa, Aigboje Aig-Imoukhuede of Nigeria, Prince Kofi Amoabeng of Ghana, Alaone of Morocco, Joseph of Kenya, Rodriguez in Mozambique and many of my senior banking colleagues from Nigeria and many more others. Fortunately Africa has found a magic cycle of Diasporans to refuel this resource. For me this is the hope, this is the guarantee that is embedded in Africa's future prosperity and this should be the basis of our covenant with investors. Let me redirect this dialogue to some truths about Africa's current capital markets 'correction'.
I, like most capital markets professional in Africa, believe the selling is indiscriminate, obviously driven by the woes of hedge funds and imploding funds such as New Star. I don't believe that the nature of the fundamentals justify the extent of continuing sell-offs we are experiencing in our African capital markets, especially as earnings expectations are also reasonably robust. Forced selling, momentum selling, indiscriminate selling of defensive and non-defensive stocks seems to be the order of the day. Banks, breweries, staple foods, cement companies are all on the block.
But what is the reality? For example at Databank we created the first Pan Africa open ended equity mutual fund in Ghana and since 1996 it has increased from an initial value of US$25 to a peak of over US$100million with over 70,000 shareholders. In the past 10 years we have averaged a return of 32.43%, and in the past 5 years it has averaged a return of 20.36%
Africa remains the rare example in the current global environment which can illustrate significant growth on both the macro and micro (earnings growth) levels, and with relatively little debt. For most of us, low PE's, double digit dividend yields, forced downward rerating of the stock market coupled with growth signal significant capital appreciation in the coming years, especially as the credit contraction eases and hedge funds and bank balance sheets become fully deleveraged in the West.
I have to mention the Sino-Africa embrace which has created grave discomfort in certain quarters. Is China a benign economic and development partner or an exploitative force. China needs to grow its US$1.4 trillion economy by over 8% to maintain social cohesion. This is a country with 20% of the world's population, but with only 7% of the world's arable land, 3% of its forests and 2% of its oil while Africa produces 11% of the world's oil supplies and has 8% of all proven reserves. China Africa trade has experienced exponential growth in the past decade. Africa's exports to China have grown from approximately US$190 million per month in 1999 to US$5 billion per month in 2008. While total bilateral Sino-African trade has grown from US$10 billion in 2000 to nearly US 110 billion in 2008.
Africa's 850 million people, though poor, have a low debt profile and a voracious demand for consumer goods. With Africa's limited exposure to toxic assets we expect its demand for Chinese products to continue to increase even as global demand shrinks.
But it is not all trade. There is extensive investment in infrastructure: mining developments, construction of roads, railways, hospitals, schools, power plants and investments in Zambia, DRC, Angola, Sudan, Nigeria, South Africa, Ghana, Liberia and many other countries across the continent.
For China, Africa is a business destination. This establishes a new working model for Africa not predicated on a colonial legacy of aid but of trade and investment. My view is that with China's entry, Africa's products, and investment opportunities will be better priced, thus giving us a better value proposition for our assets.
Ladies and Gentlemen, it is a rare and auspicious moment when Africa pulls itself up the J-curve and it is paradoxically, the events of the global financial crises that threaten to put us back into this old
Sisyphean cycle: Credit lines are curtailed, trade finance is drying up, remittances are declining and loans are being called in. Major FDI investments such as iron ore in Liberia, bauxite in Guinea, commercial agriculture in Ghana, real estate in Nigeria are being pulled and/or delayed. This is like removing sleepers from underneath a fast moving African train.
The West must recognize that it is in its own enlightened self interest to direct liquidity to Africa, because this will create the requisite demand for products from the West. Not only must the IMF and World Bank refine their interventions but the OPIC's, EXIM BANKs, KFW, and FMO etc must more creatively support and back their companies, not unlike China, to aggressively engage in critical private sector and public private partnership especially for infrastructure investments in Africa. .
But we do have our challenges, of which we must be impatient, and positively restless because we have the capacity to tackle them.
They include:
Low Financial Depth - Incomplete and missing markets
Market imperfection and asymmetric information - Gaps in capital markets integration - Lack of regional markets
Restricted Access to Financing
- Financial exclusion for most of the population (almost 50% on less than $1.25 a day) - Lack of financing for SME's and agriculture
- Poor linkages between the formal and informal sectors (80% of total employment)
High Cost of Capital
- High cost of equity and debt - Weak mobilizing capacity of Stock Market - Lack of Pension Funds - High Bank Charges
In spite of these challenges, I believe Africa is entitled to be at the table. If there was ever a time for a systemic review of Africa's place without it being viewed as pan-handling, that time is now. Financial markets, as we have all been led to believe, after all do not tend towards equilibrium. We are witnesses to the massive fiscal response to create money in order to loosen the credit crunch, recapitalize (nationalize) the banks and write off debts.
African countries in the periphery also require such care in significant doses. Allow me to propose therefore, that in addition to the G20 support to the IMF and World Bank for Africa, we must find a vehicle to guarantee long term sovereign bond issues of African countries.
This would enable Africa to also do the following:
- strengthen its banks - provide liquidity to Africa's capital markets and mutual funds and guarantee bonds/instruments denominated in local currency
Let us take advantage of easing of ideological financial paradigms and embark on fundamental systemic reforms which will serve Africa and the World's interest in the long run.
So sure there are difficulties facing investors, but I am not sure that that is the issue. Are there changes that can be made? Yes there are, and always will be. But what is unique in the New Africa that I see: A new attitude which has resulted in impressive political and economic reform;
A capital markets whose future fortunes can't be matched; A region of growth in a World of recession.
A China that is revealing the investment potential of the old continent and An alchemy that is being created by the new African Entrepreneurs on the continent and from the diaspora.
In Africa we must continue to make the Right Choices and maintain our confidence, and then our financial superstructure will become robust and support our increasing need for long term capital and a policy orientation which promotes regional growth and build strong local demand across Africa.
In Ghana our northern belt beckons massive agriculture infrastructure and industrial development to serve a regional sahelian market of over 80 million people. We must have the boldness to embark on such projects that could potentially transform the lives of many people and create a self perpetuating demand cycle.
It is a continent leaving the Jeremiah's and Cassandra's behind. Africa is moving forward. I am optimistic but not at all naïve after 19 years of being back at home.
As Friedman said of India in Nandan Nilekani's Imagining India, "it all depends: on governments as aspiring as its people; on politicians as optimistic as its youth; bureaucrats as innovative as its entrepreneurs and rural, district, regional and national leaders as impatient, creative, and energetic as their kids [and the world as excited and confident about Africa as the new African Entrepreneur]”.
The new African entrepreneur is our lodestone for a continent with renewed confidence.
'Ex Africa Semper Aliquid Novi'
Out of Africa always something new.
Thank you.
Ken Ofori-Atta, the Executive Chairman of Databank was the main speaker at last week's "Africa Investment Forum", organised by Chatham House, London. Also on the platform was President JEA Mills, who was the Special Guest.
Wednesday, May 20, 2009
PROVIDING HOMES FOR THE PEOPLE - HOW PROPERTY-OWNING DEMOCRACY WAS BASTARDISED
Sunday, March 29, 2009
Qanawu Gabby
March 2009 is ending with agitation over Ga lands and the threat of a similar agitation in the Western Region. In my view all this could have been effectively avoided or neutralised if only the New Patriotic Party was steadfast and more radical in its realisation of the dream of a property-owning democracy.
In April 4, 2007, I wrote an article explaining ‘Development in Freedom’ – the slogan of the NPP –– the party of proponents of free market and developmentalism like Danquah, Busia and Dombo That article argues, fundamental to the doctrine of Danquah-Busiaism is the principle that freedom is the primary end as well as the active means to development.
The party’s policy, in the thinking of J B Danquah, "is to liberate the energies of the people for the growth of a property owning democracy in this land, with right to life, freedom and justice, as the principles to which the Government and laws of the land should be dedicated in order specifically to enrich life, property and liberty of each and every citizen.”�
President Mills and his Vice say, with tongue in cheek, that ‘Ghanaians have changed to move forward in the right direction.’ A violent twist of logic. ‘Forward’ is actually a direction – one that denotes positive or constructive mobility as opposed to being stabile - a state of motionlessness, static horizontal mobility or backward movement. You may it is still early days, however, you may require a superhuman sense of discernment to have anything resembling a remote idea of the direction that the NDC is taking Ghana. That is not to say that the Mills-Mahama team lacks a latent desire for success.
Providing free school uniforms to a ‘privileged’ few conveniently classified as ‘deprived’ in a nation where the majority is described as ‘poor’, is the only new clear policy initiative in tune with the NDC claim of social democracy . Worrying to some of us is that Ghana runs the risk of gaining a reputation as a nation where the gap between professed ideologies and practice is taken for granted as wide.
Ideally, in the thinking of the NPP, a primary duty of the state is to guarantee to individuals (who make up society) substantive freedoms to make them active agents of a positive change for prosperity rather than passive recipients of dispensed benefits. Crucial to this freedom is an inevitable social welfare foundation, which actively ensures the provision of an environment where every individual (particularly from childhood) has the opportunity (in freedom) to gain access (through decent, affordable education, housing and health) to climbing the ladder of self-development, prosperity and security.
Unfortunately, the jury is still out on whether or not the first eight years of NPP rule did anything distinctively and intrinsically profound to significantly promote the realisation of a property-owning democracy, as compared to what was achieved by previous regimes which has clear social leanings, such as the CPP, NRC and SMC. Apart from bettering the macro-economic environment, the underlining vulnerability of which has been recently exposed, very little was achieved in the area of reforming the housing system, from security of land tenure, through better town planning, to access to decent affordable homes.
Indeed, it became a campaign joke on the NPP that, besides grand mansions that deepened the perception of only a few getting richer, the disciples of property-owning democracy (NPP) could not boast of a single completed affordable home for the masses in 8 years.
But, how modest was NPP achievement in housing? The 2008 Manifesto captured it thus: The NPP has committed an unprecedented amount of government funds to address the nation’s housing shortage with GH¢30 million (¢300 billion) for the construction of affordable homes across the country… Within the conducive business environment, the private sector now provides an average of 40,000 homes a year. Government under its affordable housing programme is currently constructing a total of 3500 flats at Borteyman and Kpone in the Greater Accra Region (1,500 flats), Asokore-Mampong in the Ashanti Region (1,192 flats), Koforidua in the Eastern Region (400 flats), Tamale in the Northern Region (400 flats). The construction of an additional 1500 affordable housing units will commence in Sekondi, Takoradi, Sunyani, Cape Coast, Wa, Bolgatanga and Ho by 2009.
The Government now has land banks totalling 50,000 acres across the country for housing development by the private sector. It has also instituted a rural housing scheme for cocoa farmers starting in the Western Region. It has also instituted a housing scheme for civil servants with a US$10 million facility placed with the Housing Finance Corporation (HFC).
For the future, the NPP said, if re-elected for a third term: it would continue with the affordable housing scheme and extend it nationwide. It would create a special Housing the People Scheme to allow employers to receive tax credits for implementation of housing schemes for their workers. The NPP made a radical promise to provide 50,000 affordable houses every year for the next five years. Make many of these houses available for rent for those who can’t afford to buy; construct at least 13,000 units of decent, affordable housing across the North within the first two years; establish a mortgage culture to provide the loan facilities for more Ghanaians to own their own homes; name every street and number every property within our first term; create a new Department of Infrastructure and Physical Planning to ensure better land use and spatial planning in our cities; and, ensure cleaner streets with the development of 20,000 sanitation (Tankase) inspectors per year for the next five years in partnership with the private sector.
It would have been the most ambitious mass housing project ever undertaken on this continent – even relatively more than what South Africa did for poor blacks, during the first 5 years of freedom. The NPP was even able to estimate that the quarter of a billion homes in 5 years project it was presenting to the electorate would cost $1 billion, for which it was sure funds could be found. So why was the programme ridiculed or ignored by the media and the party’s own commentators, including the Flagbearer? The NPP campaign team treated it as if it was smuggled into the manifesto. A lot of work went into it, and yet it was made to lack credibility. Unhelpful remarks from the Manifesto Committee Chairman that it was not government’s job to provide homes for the masses, coupled with the faint attempt at doing so in the previous two terms, contributed to such a vital socio-economic programme not tickling the voter. This was a programme if believed and voted for and implemented could have surely modernised Ghana and directly connected the NPP full-square to the needs of the so-called ordinary Ghanaian.
It would have provided jobs for tens of thousands and direct homes for a million Ghanaians. The spiralling effect of creating a vibrant mortgage environment, expanding the building materials market and bringing down rents and house prices would have meant greater access to better shelter to some 10 million Ghanaians. Ghana would have clearly changed in 10 years!
The NPP was targeting mainly the bond market, with contributions from tax revenue and the housing project’s private partners to raise money for the 50,000 housing units per year project. Even in light of this year’s credit crunch, I posit that an Akufo-Addo government would still have been able to raise $1 billion domestically in five years by adding two percentage points to VAT. The government would have had the moral authority to demand some 15% rise in VAT to pay for such an important social programme, provided it could convince the people of its commitment to the project and spending discipline specific. In 2006, total VAT revenue was GH¢588 million. By 2008, it increased to a little over GH¢1 billion, nearly double in 3 years. Going even modestly under this trend, at least GH¢1 billion extra VAT revenue could be raised from the 15% rise in the next five years to help fund the scheme to house the masses. The difficulty in President Mills funding such a housing scheme mainly with VAT proceeds is the lid he placed on his own money-lending bucket. He has made a categorical manifesto promise that the individual tax burden on the Ghanaian shall not be increased, including income tax and VAT, during his four-year term..
The Tory government managed to build a property-owning democracy in the United Kingdom ( a policy continued by ‘New’ Labour) because the state had in decades past built ‘Council Housing’ for rent to the working class, which they were later encouraged to purchase, at subsidised prices, with the help of mortgage financing.
Margaret Thatcher
In June 1987, Times reporters Christopher Ogden and Frank Melville interviewed the just re-elected (for the third term) Prime Minister of Britian, Margaret Thatcher, after only four hours of sleep and a day spent thanking campaign workers and consulting with colleagues.
Below are excerpts from the interview:
Q. How do you interpret the election?
A. It means that the policies we were pursuing, which we put openly and frankly before the people, were thought to be right for Britain. They were policies which were a partnership between government and people -- namely, we do the things which only governments can do, running the finances in a sound way, keeping inflation down, cutting controls and giving tax incentives. And we got the response in an increasing enterprise and competitiveness from the British people. And that produced a higher standard of living.
Q. Why do people accuse you so bitterly of lacking compassion?
A. Some people think that to be compassionate and caring you have to talk a lot about it. We've always taken the view that you should be judged by what you do and not by what you say, and we're prepared to be judged on that -- any day of the week.
Q. What are the most important accomplishments of your first eight years?
A. First, we have reduced the fantastic number of controls that there were over the life of our society. The greatest driving force in life, which is individual energy and effort, was becoming really cocooned. Secondly, people do need incentives to encourage them to work harder, and if you take too much away in tax, then you will not get that driving incentive. Plus the trade union law…We now know that the spirit of enterprise is there. The economy is doing well and catching up with our European competitors.
Q. What are your plans for a third term?
A. I will extend opportunities to people who never had them before. As you know, we are building a property-owning democracy. Far more people own their own homes now. We are nearly up to the United States -- not yet quite -- but now one in five of our people owns company shares. Far many more people have savings accounts. That's all extending opportunity ever more widely. End
What comes out clearly from this interview was the ideological clarity and discipline in the programme of the Tory government for the two previous consecutive terms and for the new time ahead.
Within a week of President J A Kufuor’s re-election in December 2004, Franklin Cudjoe (a founder of IMANI think tank) observed in his article ‘Building a Property Owning Democracy’, “Even though four political parties sought the mandate of the electorate, three of them, all in opposition, had a social democratic agenda whilst the incumbent and re-elected, a liberal democratic party, believed it was practicing a property-owning democracy.”
He said one of the finest institutions that have the propensity to bolster a country's economy is property rights. “If there is one thing many Ghanaians praise the current government for, it is its unwavering commitment to free speech. But free speech ought to translate into free enterprise. Unleashing the potential created in property ownership into capital formation, combined with ease of transactions through very minimum taxation, will be helping to deepen the meaning of a property-owning democracy.”
A story published on the website, myjoyonline, on March 2, 2007 quoted a Professor Ata Britwum of the University of Cape Coast as saying that “the ideology of property owning democracy is inimical to Africans since it serves the interest of the west and not the continent.” Prof. Britwum went on to say that Ghana’s First President, Kwame Nkrumah boosted industrialisation during his rule by opting for a philosophy of communal property ownership.
Kwesi Pratt, Dr Tony Aidoo and others were allowed by the NPP’s tepid approach to realising the philosophy of property-owning democracy to preach to Ghanaians that property-owning democracy was a ‘feudal’ concept which reduced the eligibility to vote to the very few landowners. They cited new buildings in the plush areas of Accra, like Cantonments and Airport Residential Area, to bastardise the philosophy of the NPP to make the NPP ‘Property-Grabbing (-Looting) Democrats’.
This led the disciples of the ideology like Washington-based Baffour Ennin to ask a profound question in 2007: ‘What’s Wrong with Property-Owning Democracy?’
He pointed out in his article with the above title, “In Ghana, the most successful enterprise is privately owned. I’m not talking about giant factories. I’m talking about the cocoa farm. Next time you go to any farming village in Ghana, ask to see the communal farm…There is no truth to Professor Britwum’s statement that property owning democracy is inimical or pernicious to the African. In my ancestral towns and villages of Akrofuom, Akrokerri, Bobiriase, Sikaman, Domiabra, Ayaase all in Adansi and Techiman and Kwapong in the Brong Ahafo Region, every cocoa farm is privately owned. Every farm belongs to somebody. In the cocoa industry as a whole, every segment that is government dominated or owned is beset with corruption and mismanagement… I dare any government to follow his misguided advice and nationalise all cocoa farms in Ghana, make them communal property and see what happens.”
He charged, “A small minority within our academic clerisy is notorious for propounding unworkable and unsustainable political and economic models purportedly to advance and protect the interests of Ghana’s hoi polloi… These aging left wing ideologues should post on their bedroom walls Bernard Shaw’s favourite quote ‘a man who is not a socialist at age 20 has no heart and a man who is a socialist at age 40 has no head’. It should be the first thing they see when they get up in the morning and the last thing they see when they retire to bed each night. They need to examine their heads because the unexamined life is not worth living.”
There is nothing wrong in being rich, he said, adding, “Property owning democracy created the likes of Bill Gates, Warren Buffett, Larry Ellison and Steve Jobs. Better than convincing Ghana’s 22 million people to stop chasing filthy lucre or looking for creative ways to confiscate it, we should understand that wealth is an enabler of everyone’s success. The so-called philosophy of communal property ownership rewards mediocrity, it also stifles initiative, creativity and competition and it almost invariably engenders laziness and dependency. What Ghanaians want is less government.”
For the sake of a better Ghana for the masses, property-owning democracy must come back in the shortest possible time and big time next time!
Qanawu Gabby
March 2009 is ending with agitation over Ga lands and the threat of a similar agitation in the Western Region. In my view all this could have been effectively avoided or neutralised if only the New Patriotic Party was steadfast and more radical in its realisation of the dream of a property-owning democracy.
In April 4, 2007, I wrote an article explaining ‘Development in Freedom’ – the slogan of the NPP –– the party of proponents of free market and developmentalism like Danquah, Busia and Dombo That article argues, fundamental to the doctrine of Danquah-Busiaism is the principle that freedom is the primary end as well as the active means to development.
The party’s policy, in the thinking of J B Danquah, "is to liberate the energies of the people for the growth of a property owning democracy in this land, with right to life, freedom and justice, as the principles to which the Government and laws of the land should be dedicated in order specifically to enrich life, property and liberty of each and every citizen.”�
President Mills and his Vice say, with tongue in cheek, that ‘Ghanaians have changed to move forward in the right direction.’ A violent twist of logic. ‘Forward’ is actually a direction – one that denotes positive or constructive mobility as opposed to being stabile - a state of motionlessness, static horizontal mobility or backward movement. You may it is still early days, however, you may require a superhuman sense of discernment to have anything resembling a remote idea of the direction that the NDC is taking Ghana. That is not to say that the Mills-Mahama team lacks a latent desire for success.
Providing free school uniforms to a ‘privileged’ few conveniently classified as ‘deprived’ in a nation where the majority is described as ‘poor’, is the only new clear policy initiative in tune with the NDC claim of social democracy . Worrying to some of us is that Ghana runs the risk of gaining a reputation as a nation where the gap between professed ideologies and practice is taken for granted as wide.
Ideally, in the thinking of the NPP, a primary duty of the state is to guarantee to individuals (who make up society) substantive freedoms to make them active agents of a positive change for prosperity rather than passive recipients of dispensed benefits. Crucial to this freedom is an inevitable social welfare foundation, which actively ensures the provision of an environment where every individual (particularly from childhood) has the opportunity (in freedom) to gain access (through decent, affordable education, housing and health) to climbing the ladder of self-development, prosperity and security.
Unfortunately, the jury is still out on whether or not the first eight years of NPP rule did anything distinctively and intrinsically profound to significantly promote the realisation of a property-owning democracy, as compared to what was achieved by previous regimes which has clear social leanings, such as the CPP, NRC and SMC. Apart from bettering the macro-economic environment, the underlining vulnerability of which has been recently exposed, very little was achieved in the area of reforming the housing system, from security of land tenure, through better town planning, to access to decent affordable homes.
Indeed, it became a campaign joke on the NPP that, besides grand mansions that deepened the perception of only a few getting richer, the disciples of property-owning democracy (NPP) could not boast of a single completed affordable home for the masses in 8 years.
But, how modest was NPP achievement in housing? The 2008 Manifesto captured it thus: The NPP has committed an unprecedented amount of government funds to address the nation’s housing shortage with GH¢30 million (¢300 billion) for the construction of affordable homes across the country… Within the conducive business environment, the private sector now provides an average of 40,000 homes a year. Government under its affordable housing programme is currently constructing a total of 3500 flats at Borteyman and Kpone in the Greater Accra Region (1,500 flats), Asokore-Mampong in the Ashanti Region (1,192 flats), Koforidua in the Eastern Region (400 flats), Tamale in the Northern Region (400 flats). The construction of an additional 1500 affordable housing units will commence in Sekondi, Takoradi, Sunyani, Cape Coast, Wa, Bolgatanga and Ho by 2009.
The Government now has land banks totalling 50,000 acres across the country for housing development by the private sector. It has also instituted a rural housing scheme for cocoa farmers starting in the Western Region. It has also instituted a housing scheme for civil servants with a US$10 million facility placed with the Housing Finance Corporation (HFC).
For the future, the NPP said, if re-elected for a third term: it would continue with the affordable housing scheme and extend it nationwide. It would create a special Housing the People Scheme to allow employers to receive tax credits for implementation of housing schemes for their workers. The NPP made a radical promise to provide 50,000 affordable houses every year for the next five years. Make many of these houses available for rent for those who can’t afford to buy; construct at least 13,000 units of decent, affordable housing across the North within the first two years; establish a mortgage culture to provide the loan facilities for more Ghanaians to own their own homes; name every street and number every property within our first term; create a new Department of Infrastructure and Physical Planning to ensure better land use and spatial planning in our cities; and, ensure cleaner streets with the development of 20,000 sanitation (Tankase) inspectors per year for the next five years in partnership with the private sector.
It would have been the most ambitious mass housing project ever undertaken on this continent – even relatively more than what South Africa did for poor blacks, during the first 5 years of freedom. The NPP was even able to estimate that the quarter of a billion homes in 5 years project it was presenting to the electorate would cost $1 billion, for which it was sure funds could be found. So why was the programme ridiculed or ignored by the media and the party’s own commentators, including the Flagbearer? The NPP campaign team treated it as if it was smuggled into the manifesto. A lot of work went into it, and yet it was made to lack credibility. Unhelpful remarks from the Manifesto Committee Chairman that it was not government’s job to provide homes for the masses, coupled with the faint attempt at doing so in the previous two terms, contributed to such a vital socio-economic programme not tickling the voter. This was a programme if believed and voted for and implemented could have surely modernised Ghana and directly connected the NPP full-square to the needs of the so-called ordinary Ghanaian.
It would have provided jobs for tens of thousands and direct homes for a million Ghanaians. The spiralling effect of creating a vibrant mortgage environment, expanding the building materials market and bringing down rents and house prices would have meant greater access to better shelter to some 10 million Ghanaians. Ghana would have clearly changed in 10 years!
The NPP was targeting mainly the bond market, with contributions from tax revenue and the housing project’s private partners to raise money for the 50,000 housing units per year project. Even in light of this year’s credit crunch, I posit that an Akufo-Addo government would still have been able to raise $1 billion domestically in five years by adding two percentage points to VAT. The government would have had the moral authority to demand some 15% rise in VAT to pay for such an important social programme, provided it could convince the people of its commitment to the project and spending discipline specific. In 2006, total VAT revenue was GH¢588 million. By 2008, it increased to a little over GH¢1 billion, nearly double in 3 years. Going even modestly under this trend, at least GH¢1 billion extra VAT revenue could be raised from the 15% rise in the next five years to help fund the scheme to house the masses. The difficulty in President Mills funding such a housing scheme mainly with VAT proceeds is the lid he placed on his own money-lending bucket. He has made a categorical manifesto promise that the individual tax burden on the Ghanaian shall not be increased, including income tax and VAT, during his four-year term..
The Tory government managed to build a property-owning democracy in the United Kingdom ( a policy continued by ‘New’ Labour) because the state had in decades past built ‘Council Housing’ for rent to the working class, which they were later encouraged to purchase, at subsidised prices, with the help of mortgage financing.
Margaret Thatcher
In June 1987, Times reporters Christopher Ogden and Frank Melville interviewed the just re-elected (for the third term) Prime Minister of Britian, Margaret Thatcher, after only four hours of sleep and a day spent thanking campaign workers and consulting with colleagues.
Below are excerpts from the interview:
Q. How do you interpret the election?
A. It means that the policies we were pursuing, which we put openly and frankly before the people, were thought to be right for Britain. They were policies which were a partnership between government and people -- namely, we do the things which only governments can do, running the finances in a sound way, keeping inflation down, cutting controls and giving tax incentives. And we got the response in an increasing enterprise and competitiveness from the British people. And that produced a higher standard of living.
Q. Why do people accuse you so bitterly of lacking compassion?
A. Some people think that to be compassionate and caring you have to talk a lot about it. We've always taken the view that you should be judged by what you do and not by what you say, and we're prepared to be judged on that -- any day of the week.
Q. What are the most important accomplishments of your first eight years?
A. First, we have reduced the fantastic number of controls that there were over the life of our society. The greatest driving force in life, which is individual energy and effort, was becoming really cocooned. Secondly, people do need incentives to encourage them to work harder, and if you take too much away in tax, then you will not get that driving incentive. Plus the trade union law…We now know that the spirit of enterprise is there. The economy is doing well and catching up with our European competitors.
Q. What are your plans for a third term?
A. I will extend opportunities to people who never had them before. As you know, we are building a property-owning democracy. Far more people own their own homes now. We are nearly up to the United States -- not yet quite -- but now one in five of our people owns company shares. Far many more people have savings accounts. That's all extending opportunity ever more widely. End
What comes out clearly from this interview was the ideological clarity and discipline in the programme of the Tory government for the two previous consecutive terms and for the new time ahead.
Within a week of President J A Kufuor’s re-election in December 2004, Franklin Cudjoe (a founder of IMANI think tank) observed in his article ‘Building a Property Owning Democracy’, “Even though four political parties sought the mandate of the electorate, three of them, all in opposition, had a social democratic agenda whilst the incumbent and re-elected, a liberal democratic party, believed it was practicing a property-owning democracy.”
He said one of the finest institutions that have the propensity to bolster a country's economy is property rights. “If there is one thing many Ghanaians praise the current government for, it is its unwavering commitment to free speech. But free speech ought to translate into free enterprise. Unleashing the potential created in property ownership into capital formation, combined with ease of transactions through very minimum taxation, will be helping to deepen the meaning of a property-owning democracy.”
A story published on the website, myjoyonline, on March 2, 2007 quoted a Professor Ata Britwum of the University of Cape Coast as saying that “the ideology of property owning democracy is inimical to Africans since it serves the interest of the west and not the continent.” Prof. Britwum went on to say that Ghana’s First President, Kwame Nkrumah boosted industrialisation during his rule by opting for a philosophy of communal property ownership.
Kwesi Pratt, Dr Tony Aidoo and others were allowed by the NPP’s tepid approach to realising the philosophy of property-owning democracy to preach to Ghanaians that property-owning democracy was a ‘feudal’ concept which reduced the eligibility to vote to the very few landowners. They cited new buildings in the plush areas of Accra, like Cantonments and Airport Residential Area, to bastardise the philosophy of the NPP to make the NPP ‘Property-Grabbing (-Looting) Democrats’.
This led the disciples of the ideology like Washington-based Baffour Ennin to ask a profound question in 2007: ‘What’s Wrong with Property-Owning Democracy?’
He pointed out in his article with the above title, “In Ghana, the most successful enterprise is privately owned. I’m not talking about giant factories. I’m talking about the cocoa farm. Next time you go to any farming village in Ghana, ask to see the communal farm…There is no truth to Professor Britwum’s statement that property owning democracy is inimical or pernicious to the African. In my ancestral towns and villages of Akrofuom, Akrokerri, Bobiriase, Sikaman, Domiabra, Ayaase all in Adansi and Techiman and Kwapong in the Brong Ahafo Region, every cocoa farm is privately owned. Every farm belongs to somebody. In the cocoa industry as a whole, every segment that is government dominated or owned is beset with corruption and mismanagement… I dare any government to follow his misguided advice and nationalise all cocoa farms in Ghana, make them communal property and see what happens.”
He charged, “A small minority within our academic clerisy is notorious for propounding unworkable and unsustainable political and economic models purportedly to advance and protect the interests of Ghana’s hoi polloi… These aging left wing ideologues should post on their bedroom walls Bernard Shaw’s favourite quote ‘a man who is not a socialist at age 20 has no heart and a man who is a socialist at age 40 has no head’. It should be the first thing they see when they get up in the morning and the last thing they see when they retire to bed each night. They need to examine their heads because the unexamined life is not worth living.”
There is nothing wrong in being rich, he said, adding, “Property owning democracy created the likes of Bill Gates, Warren Buffett, Larry Ellison and Steve Jobs. Better than convincing Ghana’s 22 million people to stop chasing filthy lucre or looking for creative ways to confiscate it, we should understand that wealth is an enabler of everyone’s success. The so-called philosophy of communal property ownership rewards mediocrity, it also stifles initiative, creativity and competition and it almost invariably engenders laziness and dependency. What Ghanaians want is less government.”
For the sake of a better Ghana for the masses, property-owning democracy must come back in the shortest possible time and big time next time!
Tuesday, May 12, 2009
How the Global Financial Crises Impact on Businesses in Ghana
British Council - Concern Universal Management Forum
How the Global Financial Crises Impact on Businesses in Ghana
UBI Estes? …….. Genesis 3:9
Ken Ofori-Atta
Databank Financial Services Ltd
UBI Estes?
Mr. Chairman
His Excellency the High Commission Nicholas Westcott,
Distinguished Panelists and Visitors affiliated with Concern Universal
Country Director of the British Council – Moses Anibaba,
Ladies and Gentlemen
It is a real honor to have this opportunity given by the British Council to be on this distinguished panel, to engage our young professionals and to discuss the financial markets’ equivalent of the fall of the Berlin Wall and its impact on our economy. I thank Moses and his team for making this possible; and sincere gratitude to Universal Concern for electing to come to Ghana at this time.
So how has the global financial crises impacted Ghana and on the micro side, our businesses? At the beginning of the crises, most countries in Africa felt sufficiently delinked and surmised they were likely to escape appreciable damage to their economies. After all, we were not part of the binge in credit in the US market; with their US $1.8 trillion of Subprime mortgages in a mortgage industry of over US$12 trillion and consumers carrying over US$800 billion of credit. Our banks had little or no “toxic assets”. Africa was enjoying reasonable political and economic stability while FDI was also increasing.
This head- in- the- sand paralysis continued until the fateful day of September 15, 2008, when Lehman Brothers, a Wall Street firm, was allowed to collapse (a tragedy, I might add). It seemed that the sluice gates had been left open, creating what Greenspan described as a “credit Tsunami”: The stock markets crashed, leading to massive wealth destruction. There was credit contraction, pure play investment banks literally vanished, banks were impaired, assets liquidated and confidence in the global financial markets was at its nadir.
The West, however, rallied and have, with breathtaking speed instituted in a sense, economic recovery and structural adjustment programs i.e. a fiscal stimulus packages (a la Breton Woods for Africa). Western Governments have essentially done three things for their economies:
-Created money to combat the credit contraction
-Recapitalized the banks and spurred banks to lend to each other and to businesses and consumers;
-Writing off/down the accumulated debt to deleverage the financial markets and thus sanitize the “toxic” assets i.e. mortgages and their derivative securities.
In addition, in the recent G20 meeting, there was a consensus on avoiding beggar-thy-neighbor policies and a strong stance against protectionism. A trillion dollar vote for the IMF/World Bank to facilitate trade credit and other liquidity interventions for emerging markets and member countries was also approved.
However Africa and Ghana for that matter has been caught in the “back draft”. Credit lines are frozen, trade finance is dried up, loans are being called in, foreign exchange is hard to come by, the currency markets have become less stable, inflationary pressures are increasing, the capital markets have taken a beating and FDI has slowed down.
After all the hard work, Africa once again is at the crossroad for a reversal of the impressive economic gains achieved in the past decade. In Ghana in the past three years (i.e. 2006-2008) exports have increased from $3.7 billion to $5.3 billion while remittances, including NGO transfers have increased from $5.8 billion to $8.7 billion. The number of Banks has increased to 26 with shareholder funds now over GHC 1 billion, with total assets of GHC 11 billion, credit to the private sector over this period has increased from GHC 1.2 billion to GHC 4.9 billion! Ghana, as you know has maintained a GDP growth rate of approximately 6% over the past few years with a historic 7.3% growth last year in 2008. Let us not for once delude ourselves into belittling the disciplined role played by our regulators: the Insurance Commission, the Securities & Exchange Commission, the Ghana Stock Exchange and most importantly the Bank of Ghana. It is through their firm and prudent supervision of the financial industry that the impact of the global financial crises has been so muted. So we thank them for this foundation of a sound financial sector. If there is one lesson we have learnt from the global financial crises it is captured in Greenspan’s mea culpa to Congress in October last year “I made a mistake in presuming that lenders themselves were more capable than regulators of protecting their finances”….I still do not understand exactly how it happened”. I believe our regulators did better than Greenspan.
We as a nation, professionals, business colleagues, and academics, should be careful as we turn “inflation targeting” into a whipping boy; proclaiming its epitaph. These are not natural times and we are going to require a combination of both monetary and fiscal instruments to build a relatively sound economic base. How do we implement policies that will propel growth, create jobs and keep us on track with our Millennium Development Goals? And still guard against inflation?
Unfortunately the current situation is inimical to the average business person: inflation is climbing, the currency has weakened, our foreign exchange reserves have dwindled, government revenues are behind targets, and banks are being tentative about lending and getting into the old ways of buying Treasury Bills. Banks are unfortunately potentially setting themselves and the economy up for an adverse feedback loop, which contracts the economy, reduces demand for loans and thus compromising the financial industry. It becomes self reinforcing and unleashes a vicious circle.
So these are issues that our private sector, after 7 sound years, is having to deal with again. In reality they are problems that predated the current financial crises. We shouldn’t be immobilized as in my view there exists unique opportunities to make a transformational shift in our economy, even in these times. Almost every cardinal principle in the market driven economy has been demystified by the current global financial crises. Financial market it seems after all do not tend towards equilibrium and periphery countries such as Ghana faced with this contagion should seize the opportunity.
So I ask the question of us Ghanaians UBI Estes……. Genesis 3: 9, God’s question to Adam and Eve in the Garden of Eden. This is not because we have eaten from the tree of knowledge or that God did not know where we were. It is asking us to be introspective, to be truthful to seize this moment in our nakedness to work together as a country and to ensure that at these times, we protect our businesses, our millennium development goals, and move the ‘bottom billion’ up the ladder.
So what do we need? We have to manage inflation and we have to grow.
-We need short term money and trade finance. So let’s tap into the IMF’s Short Term Liquidity Facility and that of the AfDB.
- We need long term money for businesses to grow. Let’s tap into Special Drawing Rights to guarantee longer-term bond issues in the international markets.
- Government should create a liquidity facility for the banks such as the EDIF fund to enable them lend at sub-inflation rates to corporates and to buy long term corporate bonds.
- With the 16% decline in our stock markets, pension and provident funds and SSNIT should be actively buying shares, investing in mutual funds and providing liquidity to the market.
- The AGI, chamber of commerce, PEF, GUTA, GSIA, and all private sector associations, should come together to prepare a private sector growth agenda for input into government policy.
- We should not shy away from bold projects in agriculture and infrastructure in these times. Let us accelerate resource transfers even as we look to our regional markets to develop sustainable demand for our industry.
In conclusion, Ghana is a country of spirit and we are simply not going to win this by might and power but by national spirit – the spirit of courage, love for each other’s development and a self-disciplined and focused nation.
So when God asks UBI ESTES, we can say SUMUS HIC ‘we are here”!
How the Global Financial Crises Impact on Businesses in Ghana
UBI Estes? …….. Genesis 3:9
Ken Ofori-Atta
Databank Financial Services Ltd
UBI Estes?
Mr. Chairman
His Excellency the High Commission Nicholas Westcott,
Distinguished Panelists and Visitors affiliated with Concern Universal
Country Director of the British Council – Moses Anibaba,
Ladies and Gentlemen
It is a real honor to have this opportunity given by the British Council to be on this distinguished panel, to engage our young professionals and to discuss the financial markets’ equivalent of the fall of the Berlin Wall and its impact on our economy. I thank Moses and his team for making this possible; and sincere gratitude to Universal Concern for electing to come to Ghana at this time.
So how has the global financial crises impacted Ghana and on the micro side, our businesses? At the beginning of the crises, most countries in Africa felt sufficiently delinked and surmised they were likely to escape appreciable damage to their economies. After all, we were not part of the binge in credit in the US market; with their US $1.8 trillion of Subprime mortgages in a mortgage industry of over US$12 trillion and consumers carrying over US$800 billion of credit. Our banks had little or no “toxic assets”. Africa was enjoying reasonable political and economic stability while FDI was also increasing.
This head- in- the- sand paralysis continued until the fateful day of September 15, 2008, when Lehman Brothers, a Wall Street firm, was allowed to collapse (a tragedy, I might add). It seemed that the sluice gates had been left open, creating what Greenspan described as a “credit Tsunami”: The stock markets crashed, leading to massive wealth destruction. There was credit contraction, pure play investment banks literally vanished, banks were impaired, assets liquidated and confidence in the global financial markets was at its nadir.
The West, however, rallied and have, with breathtaking speed instituted in a sense, economic recovery and structural adjustment programs i.e. a fiscal stimulus packages (a la Breton Woods for Africa). Western Governments have essentially done three things for their economies:
-Created money to combat the credit contraction
-Recapitalized the banks and spurred banks to lend to each other and to businesses and consumers;
-Writing off/down the accumulated debt to deleverage the financial markets and thus sanitize the “toxic” assets i.e. mortgages and their derivative securities.
In addition, in the recent G20 meeting, there was a consensus on avoiding beggar-thy-neighbor policies and a strong stance against protectionism. A trillion dollar vote for the IMF/World Bank to facilitate trade credit and other liquidity interventions for emerging markets and member countries was also approved.
However Africa and Ghana for that matter has been caught in the “back draft”. Credit lines are frozen, trade finance is dried up, loans are being called in, foreign exchange is hard to come by, the currency markets have become less stable, inflationary pressures are increasing, the capital markets have taken a beating and FDI has slowed down.
After all the hard work, Africa once again is at the crossroad for a reversal of the impressive economic gains achieved in the past decade. In Ghana in the past three years (i.e. 2006-2008) exports have increased from $3.7 billion to $5.3 billion while remittances, including NGO transfers have increased from $5.8 billion to $8.7 billion. The number of Banks has increased to 26 with shareholder funds now over GHC 1 billion, with total assets of GHC 11 billion, credit to the private sector over this period has increased from GHC 1.2 billion to GHC 4.9 billion! Ghana, as you know has maintained a GDP growth rate of approximately 6% over the past few years with a historic 7.3% growth last year in 2008. Let us not for once delude ourselves into belittling the disciplined role played by our regulators: the Insurance Commission, the Securities & Exchange Commission, the Ghana Stock Exchange and most importantly the Bank of Ghana. It is through their firm and prudent supervision of the financial industry that the impact of the global financial crises has been so muted. So we thank them for this foundation of a sound financial sector. If there is one lesson we have learnt from the global financial crises it is captured in Greenspan’s mea culpa to Congress in October last year “I made a mistake in presuming that lenders themselves were more capable than regulators of protecting their finances”….I still do not understand exactly how it happened”. I believe our regulators did better than Greenspan.
We as a nation, professionals, business colleagues, and academics, should be careful as we turn “inflation targeting” into a whipping boy; proclaiming its epitaph. These are not natural times and we are going to require a combination of both monetary and fiscal instruments to build a relatively sound economic base. How do we implement policies that will propel growth, create jobs and keep us on track with our Millennium Development Goals? And still guard against inflation?
Unfortunately the current situation is inimical to the average business person: inflation is climbing, the currency has weakened, our foreign exchange reserves have dwindled, government revenues are behind targets, and banks are being tentative about lending and getting into the old ways of buying Treasury Bills. Banks are unfortunately potentially setting themselves and the economy up for an adverse feedback loop, which contracts the economy, reduces demand for loans and thus compromising the financial industry. It becomes self reinforcing and unleashes a vicious circle.
So these are issues that our private sector, after 7 sound years, is having to deal with again. In reality they are problems that predated the current financial crises. We shouldn’t be immobilized as in my view there exists unique opportunities to make a transformational shift in our economy, even in these times. Almost every cardinal principle in the market driven economy has been demystified by the current global financial crises. Financial market it seems after all do not tend towards equilibrium and periphery countries such as Ghana faced with this contagion should seize the opportunity.
So I ask the question of us Ghanaians UBI Estes……. Genesis 3: 9, God’s question to Adam and Eve in the Garden of Eden. This is not because we have eaten from the tree of knowledge or that God did not know where we were. It is asking us to be introspective, to be truthful to seize this moment in our nakedness to work together as a country and to ensure that at these times, we protect our businesses, our millennium development goals, and move the ‘bottom billion’ up the ladder.
So what do we need? We have to manage inflation and we have to grow.
-We need short term money and trade finance. So let’s tap into the IMF’s Short Term Liquidity Facility and that of the AfDB.
- We need long term money for businesses to grow. Let’s tap into Special Drawing Rights to guarantee longer-term bond issues in the international markets.
- Government should create a liquidity facility for the banks such as the EDIF fund to enable them lend at sub-inflation rates to corporates and to buy long term corporate bonds.
- With the 16% decline in our stock markets, pension and provident funds and SSNIT should be actively buying shares, investing in mutual funds and providing liquidity to the market.
- The AGI, chamber of commerce, PEF, GUTA, GSIA, and all private sector associations, should come together to prepare a private sector growth agenda for input into government policy.
- We should not shy away from bold projects in agriculture and infrastructure in these times. Let us accelerate resource transfers even as we look to our regional markets to develop sustainable demand for our industry.
In conclusion, Ghana is a country of spirit and we are simply not going to win this by might and power but by national spirit – the spirit of courage, love for each other’s development and a self-disciplined and focused nation.
So when God asks UBI ESTES, we can say SUMUS HIC ‘we are here”!
WORRYING ECONOMIC SIGNALS FROM THE MPC - DANQUAH INSTITUTE WARNS
PRESS RELEASE BY DANQUAH INSTITUTE
Analysis by Asare Otchere-Darko
According to the Monetary Policy Committee of the Bank of Ghana, which held a press conference today (Tuesday, May 12), the “latest April survey shows further drops in both business and consumer confidence from the February surveys.”
This drop in business confidence, even though may have a short span, is reflected in the weakening of overall economic activity.
For example, revenue and expenditure are both lower this year than same time last year. But worst hit are wages and salaries, which even from the 2009 Budget projection should be far lower in real terms than the expected increases in the prices of goods and services. It is very tempting to conclude that the dawn of the ‘Better Ghana’ is some distance away from exposing a mere flicker of its radiance. We also tempted to predict that the initial signs from the Mills administration suggest that there is most likely to be a huge confusing gap between the so-called Social Democratic principles of the National Democratic Congress and implemented policies during the four-year term.
Wages and salaries of workers have already seen a significant drop in actual terms under the first 3 months of the new administration. It is a mere 2.6% of GDP (GH¢558.5 million) as compared with GH¢549.1 million (3.4% of GDP) for the same period in 2008. This is worrying for the purchasing power of Ghanaian workers if lined with the fact that headline inflation was 20.5% in March, up from 20.3% in February and 19.9% in January 2009.
Even more worrying is the economy’s reversal to pre-2001 days when Dr Kwabena Duffuor was Governor of the Bank of Ghana and Prof John Evans Atta Mills (as Vice President) was head of Government Economic Management Team. Those were the days, it would be recalled, when it made more sense to invest in short term Treasury Bills (which amounts to high interest-rated indebtedness to government) than to invest in business or in medium- to long term instruments, which were virtually non-existent in those days.
According to the latest figures from the central bank, more and more Ghanaians are now shifting their money from investing in businesses and long term securities into short-term ones like the 90-day Treasury Bills. This could only end to a fattening of government debt and its consequential crowding out of the private sector in the race for bank credit. This smacks of a return to the high inflation, high interest rate, depreciating cedi, depleting income and law growth rates of the 90s and 2000.
The indicators are far from comforting for the nation’s quest to industrialise. The share of short-dated instruments increased to 56.1%, from 45.7% at the end of December 2008. A significant and dangerous turn around of a persistent trend in the last 6 years, when we saw a growing pull of investor funds into longer-dated instruments.
The slow down in the economy is also evidenced by the slow down in revenue mobilisation. With a tax expert at the helm of affairs, it was expected that by now the country would be seeing initiatives on how to widen the tax net and expand revenue, even without the NDC breaching its manifesto commitment not to increase the tax burden on individual Ghanaians and their families.
Total revenue and grants for the first quarter of 2009 was 6.1% of GDP (GH¢1,308.1 million), compared with 6.4 percent of GDP (GH¢1,129.2 million) for the same period in 2008. Total expenditure (excluding foreign financed capital expenditure) amounted to GH¢1,249.2 million (5.8% of GDP) compared with GH¢1,265.3 million (7.2% of GDP) for the same period in 2008.
While the drop in expenditure may be good for the narrowing of the fiscal deficit it offers no comfort to the Ghanaian worker whose standard of living has seen a dip this year. It was also very bad news for the all-important project of developing the country’s physical infrastructure.
We are also very sceptical about the fulfilment of the NDC promise to create jobs. For example, real annual growth of credit to the private sector was as low as 25.6% at the end of March 2009, a huge a slowdown from the 38.9% for March 2008.
Since the private sector is the engine of growth, there are worrying indications that its ability to create job will be severely checked by the rising cost of loans and the depleting trend of consumers’ purchasing power. We are, however, looking up to Government to unfold its big plans for the agricultural sector – the only area where one can be cautiously optimistic of any significant growth in the short- to medium term.
The latest figures from the BoG show that the trend of the last couple of years which saw the commercial banks chasing after consumers for personal loans has significantly eased down. We may call it non-quantitative easing.
The share of households (mostly consumer loans) has eased to 20.4% in March 2009. This, the figures show, is significantly lower than the 27.4% recorded in March 2008.
More worrying for businesses up and down the country is the cost of lending which is now as high as 37%. The BoG puts average lending rates 400 basis points higher this first quarter of 2009 than where it was last year. Though lending today is said to average 31.25%, for the majority of small scale enterprises (the biggest employment base in Ghana), lending rates are usually above the 35% mark.
Another critical indicator of Ghana’s worsening economy is the growing size of bad loans. Non-Performing Loans (NPL) ratio and the loan loss provision to gross loans ratio both increased by 9.6% and 7.6% respectively in March 2009, compared with 8.7% and 5.9% for the same period in 2008.
Yes, it is very clear that Ghana has been caught in the global financial crisis and its concomitant future uncertainties make it difficult for our $17 billion economy. But, what is unusual in Ghana is that unlike the worst hit areas (like the OECD countries) where the cost of borrowing is now at record low levels, about 1.5% interest rate in some cases, here in Ghana it is rather rising and rising. There must either be something fundamentally wrong in our analysis of the problem and/or our application formula of solutions.
It is very clear that our nation requires more innovative measures from Government than the current escapist posture of seeking refuge behind the curtain of global financial crisis.
With Ghana enjoying its highest growth rate for 30 years (of 7.3%) last year and the new government showing signs of tackling the debt, this sees total public debt, which now stands at $7,742.4 million, representing 49.2% of GDP), down from $7,918.1 million or 54.6% in 2008.
While we admire attempts to narrow the fiscal deficit of 11.5% or so to 3% in the medium term, the seeming lack of initiative to tackle rising cost of living and the growing threat of joblessness, in our view, smack of a return to the (P)NDC days where the priority was more to satisfy IMF conditionalities than to tackle the economic situation of Ghanaians and the underlying weaknesses of our national economy.
President Mills and his government, while singing on the international roof tops that they believe in “transparency”, we believe Government can be more forthcoming with details of the negotiations at the Spring Meeting in Washington, DC, between Ghana and the International Monetary Fund and the World Bank.
Yesterday, we believe Dr Paul Acquah, the Governor of the Bank of Ghana, gave Ghanaians a big enough hint of what they have to do to get the chased-after monies from the Bank and Fund to meet our development programmes.
He said, “The Government budget for 2009 was presented in March. The general thrust of policy in the budget is to correct the fiscal slippage observed in 2008 and to re-establish the role of fiscal policy in achieving accelerated growth with stability. In this regard, the budget sets a fiscal consolidation path that reduces the overall fiscal deficit to 9.4 percent in 2009 with a medium term objective of 3 percent. This would largely be achieved through stringent expenditure review and measures including efficient revenue administration to create fiscal space for increased developmental programmes.” (Emphasis ours)
We are appealing to President Mills and his Finance Minister to come clean on which belts have to be tightened in order for the country to receive the relatively huge allocations of funds being bandied about from the Washington trip.
We believe it to be potentially very positive for Ghana if news that the recent Spring Meeting of the Fund and Bank in Washington has earned Ghana a tentative allocation of about $3.2 billion. About $2.2 billion of the amount, we are told, is expected to come from the World Bank essentially for budget support programmes, while the remaining $1 billion support from the IMF is to “shore up the country's foreign exchange reserves.”
From the World Bank, we are told that $1.2 billion has been tentatively allocated to Ghana for Budget/Sector Support Programmes and Projects for the ensuing three-year period. Of this amount $450 million had been earmarked for budget support for the next 3 years, with an additional amount of $75 million already allocated to Ghana.
Dr Duffuor may do well to explain to Ghanaians what exactly is meant by ‘shoring up foreign exchange reserves’. It is recalled Dr Duffuor, Finance Minister, recently held a press conference, where he lambasted NPP and the central bank for doing just that in the last couple of years after redenomination.
From what we are gathering, the Fund’s position to the Ghana government is that there should be no scope now for, what they call, countercyclical fiscal loosening. Indeed, the Fund is calling for ‘upfront fiscal restraint.’ Which means keep the lid on spending so tight as to keep fiscal deficit down, whether or not the spending is for essential infrastructural development or lifeline interventions.
In March 2009, the IMF announced that it has “modernised its conditionality framework in the context of a comprehensive reform to strengthen its capacity to prevent and resolve crises.” The new framework, according to the Fund, “ensures that conditions linked to disbursements of IMF financing are sufficiently focused and adequately tailored to the varying strengths of members’ policies and fundamentals.”
Yet, this is no comfort to Ghanaians when the details of what we are pledging to do in return for the funds are still a heavily guarded secret. Those details are more important than the intention of the Fund and Bank for so-called greater country ownership.
If President Mills really believe in what he told the international community last week that greater transparency helps development, then he can begin in a big way by telling Ghanaians what type of bullet is to be bitten and who and who may have the bigger and harder bits to bite.
The IMF has said lending will no longer be tied to its mandatory structural performance criteria starting May 1. Instead, borrowing countries would be able to receive money based on their domestic reform programmes.
We are yet to be convinced. They point out that conditionalities were of two types. One is of structural conditions, with the other one dealing with macroeconomic conditions, which may include criteria for containing inflation, reducing budget deficits and public debt, or strengthening the central bank's reserves.
The bottom line is that the details of our current arrangement are basically all about the second set of conditionalities above – so what then is new?
The $1 billion tentative allocation from the IMF seems far from certain. It is described as “a possible precautionary standby arrangement of not less than $1 billion to support Ghana’s foreign exchange reserves.”
Standby arrangement is an IMF decision where a member country is assured to purchase or draw on funds from the General Resources Account up to a specified amount for a specified short period of say two years. The catch is that the member must observe the terms of conditionalities set out in the supporting arrangement in order to draw on the funds.
When the Fund says treat a standby arrangement as precautionary, it usually means you cannot draw on the Fund resources unless the need arises.
Nevertheless, the $1bn must still be seen as good news because much of it seeks to strengthen our crisis preparedness. In our case mainly the depreciating cedi and rising cost of vital import commodities.
The $1bn loan, if we ever get it, would be charged at a market-based interest rate (currently 1.5 percent, but potentially higher), and with an unusually short repayment period (less than 5 years).
The signs are not good. However, it is too early to conclude on a negative note. President Mills has enough time to drive the economy with greater oomph than he has so far shown. He should do so not with windows of the vehicle tinted. We need more transparency from him and his government.
The author is the Executive Director of the Danquah Institute.
Analysis by Asare Otchere-Darko
According to the Monetary Policy Committee of the Bank of Ghana, which held a press conference today (Tuesday, May 12), the “latest April survey shows further drops in both business and consumer confidence from the February surveys.”
This drop in business confidence, even though may have a short span, is reflected in the weakening of overall economic activity.
For example, revenue and expenditure are both lower this year than same time last year. But worst hit are wages and salaries, which even from the 2009 Budget projection should be far lower in real terms than the expected increases in the prices of goods and services. It is very tempting to conclude that the dawn of the ‘Better Ghana’ is some distance away from exposing a mere flicker of its radiance. We also tempted to predict that the initial signs from the Mills administration suggest that there is most likely to be a huge confusing gap between the so-called Social Democratic principles of the National Democratic Congress and implemented policies during the four-year term.
Wages and salaries of workers have already seen a significant drop in actual terms under the first 3 months of the new administration. It is a mere 2.6% of GDP (GH¢558.5 million) as compared with GH¢549.1 million (3.4% of GDP) for the same period in 2008. This is worrying for the purchasing power of Ghanaian workers if lined with the fact that headline inflation was 20.5% in March, up from 20.3% in February and 19.9% in January 2009.
Even more worrying is the economy’s reversal to pre-2001 days when Dr Kwabena Duffuor was Governor of the Bank of Ghana and Prof John Evans Atta Mills (as Vice President) was head of Government Economic Management Team. Those were the days, it would be recalled, when it made more sense to invest in short term Treasury Bills (which amounts to high interest-rated indebtedness to government) than to invest in business or in medium- to long term instruments, which were virtually non-existent in those days.
According to the latest figures from the central bank, more and more Ghanaians are now shifting their money from investing in businesses and long term securities into short-term ones like the 90-day Treasury Bills. This could only end to a fattening of government debt and its consequential crowding out of the private sector in the race for bank credit. This smacks of a return to the high inflation, high interest rate, depreciating cedi, depleting income and law growth rates of the 90s and 2000.
The indicators are far from comforting for the nation’s quest to industrialise. The share of short-dated instruments increased to 56.1%, from 45.7% at the end of December 2008. A significant and dangerous turn around of a persistent trend in the last 6 years, when we saw a growing pull of investor funds into longer-dated instruments.
The slow down in the economy is also evidenced by the slow down in revenue mobilisation. With a tax expert at the helm of affairs, it was expected that by now the country would be seeing initiatives on how to widen the tax net and expand revenue, even without the NDC breaching its manifesto commitment not to increase the tax burden on individual Ghanaians and their families.
Total revenue and grants for the first quarter of 2009 was 6.1% of GDP (GH¢1,308.1 million), compared with 6.4 percent of GDP (GH¢1,129.2 million) for the same period in 2008. Total expenditure (excluding foreign financed capital expenditure) amounted to GH¢1,249.2 million (5.8% of GDP) compared with GH¢1,265.3 million (7.2% of GDP) for the same period in 2008.
While the drop in expenditure may be good for the narrowing of the fiscal deficit it offers no comfort to the Ghanaian worker whose standard of living has seen a dip this year. It was also very bad news for the all-important project of developing the country’s physical infrastructure.
We are also very sceptical about the fulfilment of the NDC promise to create jobs. For example, real annual growth of credit to the private sector was as low as 25.6% at the end of March 2009, a huge a slowdown from the 38.9% for March 2008.
Since the private sector is the engine of growth, there are worrying indications that its ability to create job will be severely checked by the rising cost of loans and the depleting trend of consumers’ purchasing power. We are, however, looking up to Government to unfold its big plans for the agricultural sector – the only area where one can be cautiously optimistic of any significant growth in the short- to medium term.
The latest figures from the BoG show that the trend of the last couple of years which saw the commercial banks chasing after consumers for personal loans has significantly eased down. We may call it non-quantitative easing.
The share of households (mostly consumer loans) has eased to 20.4% in March 2009. This, the figures show, is significantly lower than the 27.4% recorded in March 2008.
More worrying for businesses up and down the country is the cost of lending which is now as high as 37%. The BoG puts average lending rates 400 basis points higher this first quarter of 2009 than where it was last year. Though lending today is said to average 31.25%, for the majority of small scale enterprises (the biggest employment base in Ghana), lending rates are usually above the 35% mark.
Another critical indicator of Ghana’s worsening economy is the growing size of bad loans. Non-Performing Loans (NPL) ratio and the loan loss provision to gross loans ratio both increased by 9.6% and 7.6% respectively in March 2009, compared with 8.7% and 5.9% for the same period in 2008.
Yes, it is very clear that Ghana has been caught in the global financial crisis and its concomitant future uncertainties make it difficult for our $17 billion economy. But, what is unusual in Ghana is that unlike the worst hit areas (like the OECD countries) where the cost of borrowing is now at record low levels, about 1.5% interest rate in some cases, here in Ghana it is rather rising and rising. There must either be something fundamentally wrong in our analysis of the problem and/or our application formula of solutions.
It is very clear that our nation requires more innovative measures from Government than the current escapist posture of seeking refuge behind the curtain of global financial crisis.
With Ghana enjoying its highest growth rate for 30 years (of 7.3%) last year and the new government showing signs of tackling the debt, this sees total public debt, which now stands at $7,742.4 million, representing 49.2% of GDP), down from $7,918.1 million or 54.6% in 2008.
While we admire attempts to narrow the fiscal deficit of 11.5% or so to 3% in the medium term, the seeming lack of initiative to tackle rising cost of living and the growing threat of joblessness, in our view, smack of a return to the (P)NDC days where the priority was more to satisfy IMF conditionalities than to tackle the economic situation of Ghanaians and the underlying weaknesses of our national economy.
President Mills and his government, while singing on the international roof tops that they believe in “transparency”, we believe Government can be more forthcoming with details of the negotiations at the Spring Meeting in Washington, DC, between Ghana and the International Monetary Fund and the World Bank.
Yesterday, we believe Dr Paul Acquah, the Governor of the Bank of Ghana, gave Ghanaians a big enough hint of what they have to do to get the chased-after monies from the Bank and Fund to meet our development programmes.
He said, “The Government budget for 2009 was presented in March. The general thrust of policy in the budget is to correct the fiscal slippage observed in 2008 and to re-establish the role of fiscal policy in achieving accelerated growth with stability. In this regard, the budget sets a fiscal consolidation path that reduces the overall fiscal deficit to 9.4 percent in 2009 with a medium term objective of 3 percent. This would largely be achieved through stringent expenditure review and measures including efficient revenue administration to create fiscal space for increased developmental programmes.” (Emphasis ours)
We are appealing to President Mills and his Finance Minister to come clean on which belts have to be tightened in order for the country to receive the relatively huge allocations of funds being bandied about from the Washington trip.
We believe it to be potentially very positive for Ghana if news that the recent Spring Meeting of the Fund and Bank in Washington has earned Ghana a tentative allocation of about $3.2 billion. About $2.2 billion of the amount, we are told, is expected to come from the World Bank essentially for budget support programmes, while the remaining $1 billion support from the IMF is to “shore up the country's foreign exchange reserves.”
From the World Bank, we are told that $1.2 billion has been tentatively allocated to Ghana for Budget/Sector Support Programmes and Projects for the ensuing three-year period. Of this amount $450 million had been earmarked for budget support for the next 3 years, with an additional amount of $75 million already allocated to Ghana.
Dr Duffuor may do well to explain to Ghanaians what exactly is meant by ‘shoring up foreign exchange reserves’. It is recalled Dr Duffuor, Finance Minister, recently held a press conference, where he lambasted NPP and the central bank for doing just that in the last couple of years after redenomination.
From what we are gathering, the Fund’s position to the Ghana government is that there should be no scope now for, what they call, countercyclical fiscal loosening. Indeed, the Fund is calling for ‘upfront fiscal restraint.’ Which means keep the lid on spending so tight as to keep fiscal deficit down, whether or not the spending is for essential infrastructural development or lifeline interventions.
In March 2009, the IMF announced that it has “modernised its conditionality framework in the context of a comprehensive reform to strengthen its capacity to prevent and resolve crises.” The new framework, according to the Fund, “ensures that conditions linked to disbursements of IMF financing are sufficiently focused and adequately tailored to the varying strengths of members’ policies and fundamentals.”
Yet, this is no comfort to Ghanaians when the details of what we are pledging to do in return for the funds are still a heavily guarded secret. Those details are more important than the intention of the Fund and Bank for so-called greater country ownership.
If President Mills really believe in what he told the international community last week that greater transparency helps development, then he can begin in a big way by telling Ghanaians what type of bullet is to be bitten and who and who may have the bigger and harder bits to bite.
The IMF has said lending will no longer be tied to its mandatory structural performance criteria starting May 1. Instead, borrowing countries would be able to receive money based on their domestic reform programmes.
We are yet to be convinced. They point out that conditionalities were of two types. One is of structural conditions, with the other one dealing with macroeconomic conditions, which may include criteria for containing inflation, reducing budget deficits and public debt, or strengthening the central bank's reserves.
The bottom line is that the details of our current arrangement are basically all about the second set of conditionalities above – so what then is new?
The $1 billion tentative allocation from the IMF seems far from certain. It is described as “a possible precautionary standby arrangement of not less than $1 billion to support Ghana’s foreign exchange reserves.”
Standby arrangement is an IMF decision where a member country is assured to purchase or draw on funds from the General Resources Account up to a specified amount for a specified short period of say two years. The catch is that the member must observe the terms of conditionalities set out in the supporting arrangement in order to draw on the funds.
When the Fund says treat a standby arrangement as precautionary, it usually means you cannot draw on the Fund resources unless the need arises.
Nevertheless, the $1bn must still be seen as good news because much of it seeks to strengthen our crisis preparedness. In our case mainly the depreciating cedi and rising cost of vital import commodities.
The $1bn loan, if we ever get it, would be charged at a market-based interest rate (currently 1.5 percent, but potentially higher), and with an unusually short repayment period (less than 5 years).
The signs are not good. However, it is too early to conclude on a negative note. President Mills has enough time to drive the economy with greater oomph than he has so far shown. He should do so not with windows of the vehicle tinted. We need more transparency from him and his government.
The author is the Executive Director of the Danquah Institute.
Ghana needs Founders' Day, NOT Founder's Day
Gabby Asare Otchere-Darko
I’d intended to critique President Mills’ ‘state of the nation address’ but was not so sure which part of the bacon to slice so went for a spot of foreign material that was at the very top, which reads: “Let me acknowledge our first President, Osagyefo Dr Kwame Nkrumah, that illustrious Founder of our nation. His selfless leadership serves as a point of reference in our determination to build a better Ghana. Incidentally, this year marks the 100th anniversary of Dr Nkrumah’s birth and a as country we should commemorate the event in an appropriate and befitting manner. Among others, we intend to honour Dr Nkrumah’s memory with a national holiday to be known as Founder’s Day and we will be presenting legislation to Parliament to this effect.”
In so doing, Prof Mills has found a ‘neat’ way to reward his own Nkrumaism but should this be done at the cost of a serious manipulation of history and disregard for Ghana’s true story? Should we do so by ignoring the collective sacrifices of the many who fought this fight before and then alongside Nkrumah?
In short my answer is no: Ghana should be focusing on Founders’ Day rather than a Founder’s Day. Perhaps a minor change of syntax, but a major change to a day that would mark the joint contribution of our many nationalists, especially during the period when the fight for independence was most formalised, intense, collective and influential.
There is a date that can honour all, including the CPP founder. A date that stands out in the history books as perhaps the real birth of the idea of an independent Ghana: August 4 1947.
The people who gathered that day at Saltpond to inaugurate the United Gold Coast Convention, the first true national nationalist party of the Gold Coast, included paramount chiefs, clergymen, lawyers, entrepreneurs, teachers, traders and “men and women from all walks of life in the Gold Coast”, according to a witness.
In the words of the chronicler, L H Ofosu-Appiah, August 4, 1947 “marked the beginning of a new era in the Gold Coast.”
It is a date that had immense meaning for those who gathered that day to champion the rights of our people and our nation. It is the date of a major political event, an event which shaped and determined the course of our collective history – rather than the personal birthday of one individual. In any case, Francis Kofi Nwiah Kwame Nkrumah did not even know his date of birth. To please form, Mr Nkrumah invented a birthday for himself: September 21, 1909 – which happened to fall on a Tuesday.
On the other hand, 4 August 1947 was recognised by those present at the time as a defining moment in our history, and so it deserves to be recognised and commemorated by new generations of Ghanaians as the day their forebearers – not just one but many – joined together to create a better, brighter, independent future for their children and their children’s children.
Indeed, the formation of a structured nationalist movement for independence is said to have started when in February 1947, Dr Danquah paid a visit to George Alfred “Paa” Grant in Sekondi, a rich ship merchant who served on the Legislative Council under Governor Guggisberg. This led to a meeting with leading barristers F Awoonor-Wiliams, R S Blay and members of the Aborigines Rights Protection Society Messrs W E G Sekyi, George Moore and R S Wood, and members of the Gold Coast People’s League, including its Chairman Akufo-Addo and Secretary J W de Graft Johnson, who together joined hands with the chiefs to form a national movement.
What made this group national was that it was built to incorporate all the small nationalist movements of the time, including Obetsebi-Lamptey’s National League of the Gold Coast and J B’s Youth Conference. It was to be called the Gold Coast People’s Party, but William “Paa Wilie” Ofori Atta and his uncle Dr Danquah had other ideas, and went for the United Gold Coast Convention instead.
Saltpond was a significant choice for a location because it was the headquarters of the Joint Provincial Council of chiefs and others. Paa Grant chaired the August 4 occasion and Dr Danquah delivered the inaugural address, which is Ghana’s version of the Declaration of Independence. Although the Declaration of Independence was made on July 4, 1776, it was not until 1787 that the American Constitution came to being. Yet, July 4 holds the kind of significance to Americans which August 4 should hold equally for Ghanaians.
J B began his Saltpond address, “We have come from all the corners of this country, come to Saltpond for a specific purpose: for a decision. We have come to take a decision whether our country and people are any longer to tolerate a system of government under which those who are in control of government are not under the control of those who are governed… We must have, here and now, if we are to be governed, a new kind of freedom, a Gold Coast freedom, a Gold Coast liberty. We left our homes in Ghana and came down here to build for ourselves a new home. There is one thing we brought with us from ancient Ghana [870 years ago]. We brought with us our ancient freedom. Today the safety of that freedom is threatened, has been continuously threatened for a 100 years, since the Bond of 1844, and the time has come for a decision.”
The decision was dully taken on that date and that decision set in motion the train for independence until it came to a stop on March 6, 1957. Such a date, on which so many men and groups committed to the idea of self-rule came together, should be better considered as Founders’ Day rather than the fictional birthday of a man who undoubtedly played a very significant role in the founding of Ghana but who nevertheless cannot fairly be credited as the sole ‘Founder’ of Ghana.
Within the UGCC, you could connect every true nationalist of the period, from Nkrumah to others such as Dr de Graft Johnson, Koi Larbi, E A Armah, R P Baafour, R D Nelson, Laud Lartey, Quist-Therson, E O Lartsen, K Brakatu Ateko, Amabibie, E Quarcoo Tagoe, Enoch Mensah, Asuana Quartey, Molade Akiwumi, W M Q Halm, Oheneba Sakyi Djan and V B Annan. Other nationalists who contributed at the time can be added, including Nii Kwabena Bonner, and Osu Alata Mantse, who led the nationwide boycott of foreign goods.
Fellow of the Ghana Academy of Arts and Sciences, Professor Samuel Kingsley Botwe Asante, has argued that Dr Danquah and his colleague nationalists of the Gold Coast employed Pan-Africanism and regionalism long before Kwame Nkrumah returned to Ghana in December 1947.
Founders’ Day should also acknowledge the ex-servicemen procession of 28th February 1948 and the martyrdom of Sergeant Adjetey and Corporal Attipoe and Private Odartei Lamptey.
The direct link of the leaders of the UGCC to the events of 28 February cannot be overlooked by Prof Mills.
It was in the House of Akufo-Addo, Betty House, at a meeting of the working committee of the UGCC, including Nkrumah and Ako Adjei, that Dr Danquah sent a cablegram to the Secretary of State for the Colonies in the UK, calling for the recall of the Governor, the establishment of an interim government which the UGCC would run and a Constituent Assembly for new constitution for self-government, among other demands.
J B fired another telegram to the chiefs and people, Ghana’s version of the Gettysburg Address, declaring that “The Hour of Liberation Has Struck”, with the inspirational words, “Inheritors of Ghana’s ancient kingdom. My message as you see, is not moved by fear. Aggrey blotted fear from our dictionary. ‘Eagle fly for thou art not a chick!”
This led to the arrest of the men to be later named the Big Six: Danquah, Nkrumah, Ofori-Atta, Obetsebi-Lamptey, Akufo-Addo and Ako Adjei. It was their arrest after the riots that ignited the fire of nationalism among the peoples of the Gold Coast nationwide. But history has been most unfair to R S Blay and James Quist-Therson who were detained on 13 March 1948, two days later, and so missed by a tiny margin their rightful inclusion in the group marked by history as the leaders of our liberation struggle.
The Watson Commission was then set up to “enquire into and report on the recent disturbances in the Gold Coast and their underlying causes; and to make recommendations on any matter arising from their enquiry.” During its sittings, an unstoppable kind of nationalism gripped the nation. The Watson report led to the formation of the Constitutional Committee under Mr Justice J Henley Coussey. Its mandate was to “To examine the proposals for constitutional and political reform in paragraph 122 of the Report of the Commission of Inquiry into Disturbances on the Gold Coast, 1948, and due regard being paid to the views expressed on them by His Majesty’s Government and to consider the extend to which they can be accepted and the manner in which they can be implemented.” The independence train was fast on the move.
The Convention People’s Party was launched in Accra on Sunday, 12th June, 1949 – almost two years after the UGCC. In the words of J B to Nkrumah, “the very name ‘United Gold Coast Convention’ was devised by me and Willie, which you subsequently filched for the name of your party, Convention People’s Party.” Thus, to adopt the day of the inauguration of the UGCC, August 4, as Founders’ Day pays tribute to the CPP and its founder.
Mr Nkrumah himself admits in the first page of his book ‘I Speak Freedom’ that there was “a considerable political awakening in the Gold Coast between 1919 and 1947” before he returned to Ghana.
Yet, as a hint of his own issues with according due credit to others, Nkrumah turned around to claim on page 53 of his other book ‘Dark Days in Ghana’, (1967) that it was he who launched the nucleus of the UGCC in Saltpond – but he shifts this monumental event by more than four months to December 29, 1947 to fit with his return to Ghana.
As Prof SKB Asante says: “Osagyefo perhaps unconsciously, makes the date of confirmation of his appointment as Secretary-General of the UGCC, which was December 29, 1947, appear to be the date on which the organization was actually launched.”
In the words of Prof Kwame Okoampa-Ahoofe, “Dr Danquah emerged into national spotlight during the mid-1920s, there was no formidably organised, broad-based political apparatus clamouring for the imminent overthrow of the British colonial regime. There had largely been ethnic groupings such as existed in Fanteland, mainly in the Cape Coast-Anomabu-Elmina district of the Gold Coast littoral, as well as several others in the central and northern halves of the country. It was Danquah who was to lead the United Gold Coast Convention (UGCC) to pose a systematic and formidable counter-force to British imperialism, from 1947 onwards.”
This, of course, is not to disregard the work of men like Ephraim Casely-Hayford nor to dismiss the role of Nkrumah. But as we continue to consolidate our democracy and seek to empower our people, we should guard against elevating one individual above all others, and instead recognise that our independence was won by a collective determination that brought together people across the Gold Coast.
President Mills is free to create another public holiday and in honour of Kwame Nkrumah, Ghana’s first President and the world’s renowned Pan-Africanist. But, what he should not attempt to do is to call it Founder’s Day.
However, if we are to create a ‘Founders’ Day’ to mark the work of those who brought this about, it should commemorate a date which marks the efforts of all our founding nationalists rather than the birthday of just one – it should be a Founders’ Day, not a Founder’s Day.
This article first appeared in The Statesman of Monday 23, Feb. The author, Gabby Asare Otchere-Darko, is the Executive Director of the Danquah Institute.
I’d intended to critique President Mills’ ‘state of the nation address’ but was not so sure which part of the bacon to slice so went for a spot of foreign material that was at the very top, which reads: “Let me acknowledge our first President, Osagyefo Dr Kwame Nkrumah, that illustrious Founder of our nation. His selfless leadership serves as a point of reference in our determination to build a better Ghana. Incidentally, this year marks the 100th anniversary of Dr Nkrumah’s birth and a as country we should commemorate the event in an appropriate and befitting manner. Among others, we intend to honour Dr Nkrumah’s memory with a national holiday to be known as Founder’s Day and we will be presenting legislation to Parliament to this effect.”
In so doing, Prof Mills has found a ‘neat’ way to reward his own Nkrumaism but should this be done at the cost of a serious manipulation of history and disregard for Ghana’s true story? Should we do so by ignoring the collective sacrifices of the many who fought this fight before and then alongside Nkrumah?
In short my answer is no: Ghana should be focusing on Founders’ Day rather than a Founder’s Day. Perhaps a minor change of syntax, but a major change to a day that would mark the joint contribution of our many nationalists, especially during the period when the fight for independence was most formalised, intense, collective and influential.
There is a date that can honour all, including the CPP founder. A date that stands out in the history books as perhaps the real birth of the idea of an independent Ghana: August 4 1947.
The people who gathered that day at Saltpond to inaugurate the United Gold Coast Convention, the first true national nationalist party of the Gold Coast, included paramount chiefs, clergymen, lawyers, entrepreneurs, teachers, traders and “men and women from all walks of life in the Gold Coast”, according to a witness.
In the words of the chronicler, L H Ofosu-Appiah, August 4, 1947 “marked the beginning of a new era in the Gold Coast.”
It is a date that had immense meaning for those who gathered that day to champion the rights of our people and our nation. It is the date of a major political event, an event which shaped and determined the course of our collective history – rather than the personal birthday of one individual. In any case, Francis Kofi Nwiah Kwame Nkrumah did not even know his date of birth. To please form, Mr Nkrumah invented a birthday for himself: September 21, 1909 – which happened to fall on a Tuesday.
On the other hand, 4 August 1947 was recognised by those present at the time as a defining moment in our history, and so it deserves to be recognised and commemorated by new generations of Ghanaians as the day their forebearers – not just one but many – joined together to create a better, brighter, independent future for their children and their children’s children.
Indeed, the formation of a structured nationalist movement for independence is said to have started when in February 1947, Dr Danquah paid a visit to George Alfred “Paa” Grant in Sekondi, a rich ship merchant who served on the Legislative Council under Governor Guggisberg. This led to a meeting with leading barristers F Awoonor-Wiliams, R S Blay and members of the Aborigines Rights Protection Society Messrs W E G Sekyi, George Moore and R S Wood, and members of the Gold Coast People’s League, including its Chairman Akufo-Addo and Secretary J W de Graft Johnson, who together joined hands with the chiefs to form a national movement.
What made this group national was that it was built to incorporate all the small nationalist movements of the time, including Obetsebi-Lamptey’s National League of the Gold Coast and J B’s Youth Conference. It was to be called the Gold Coast People’s Party, but William “Paa Wilie” Ofori Atta and his uncle Dr Danquah had other ideas, and went for the United Gold Coast Convention instead.
Saltpond was a significant choice for a location because it was the headquarters of the Joint Provincial Council of chiefs and others. Paa Grant chaired the August 4 occasion and Dr Danquah delivered the inaugural address, which is Ghana’s version of the Declaration of Independence. Although the Declaration of Independence was made on July 4, 1776, it was not until 1787 that the American Constitution came to being. Yet, July 4 holds the kind of significance to Americans which August 4 should hold equally for Ghanaians.
J B began his Saltpond address, “We have come from all the corners of this country, come to Saltpond for a specific purpose: for a decision. We have come to take a decision whether our country and people are any longer to tolerate a system of government under which those who are in control of government are not under the control of those who are governed… We must have, here and now, if we are to be governed, a new kind of freedom, a Gold Coast freedom, a Gold Coast liberty. We left our homes in Ghana and came down here to build for ourselves a new home. There is one thing we brought with us from ancient Ghana [870 years ago]. We brought with us our ancient freedom. Today the safety of that freedom is threatened, has been continuously threatened for a 100 years, since the Bond of 1844, and the time has come for a decision.”
The decision was dully taken on that date and that decision set in motion the train for independence until it came to a stop on March 6, 1957. Such a date, on which so many men and groups committed to the idea of self-rule came together, should be better considered as Founders’ Day rather than the fictional birthday of a man who undoubtedly played a very significant role in the founding of Ghana but who nevertheless cannot fairly be credited as the sole ‘Founder’ of Ghana.
Within the UGCC, you could connect every true nationalist of the period, from Nkrumah to others such as Dr de Graft Johnson, Koi Larbi, E A Armah, R P Baafour, R D Nelson, Laud Lartey, Quist-Therson, E O Lartsen, K Brakatu Ateko, Amabibie, E Quarcoo Tagoe, Enoch Mensah, Asuana Quartey, Molade Akiwumi, W M Q Halm, Oheneba Sakyi Djan and V B Annan. Other nationalists who contributed at the time can be added, including Nii Kwabena Bonner, and Osu Alata Mantse, who led the nationwide boycott of foreign goods.
Fellow of the Ghana Academy of Arts and Sciences, Professor Samuel Kingsley Botwe Asante, has argued that Dr Danquah and his colleague nationalists of the Gold Coast employed Pan-Africanism and regionalism long before Kwame Nkrumah returned to Ghana in December 1947.
Founders’ Day should also acknowledge the ex-servicemen procession of 28th February 1948 and the martyrdom of Sergeant Adjetey and Corporal Attipoe and Private Odartei Lamptey.
The direct link of the leaders of the UGCC to the events of 28 February cannot be overlooked by Prof Mills.
It was in the House of Akufo-Addo, Betty House, at a meeting of the working committee of the UGCC, including Nkrumah and Ako Adjei, that Dr Danquah sent a cablegram to the Secretary of State for the Colonies in the UK, calling for the recall of the Governor, the establishment of an interim government which the UGCC would run and a Constituent Assembly for new constitution for self-government, among other demands.
J B fired another telegram to the chiefs and people, Ghana’s version of the Gettysburg Address, declaring that “The Hour of Liberation Has Struck”, with the inspirational words, “Inheritors of Ghana’s ancient kingdom. My message as you see, is not moved by fear. Aggrey blotted fear from our dictionary. ‘Eagle fly for thou art not a chick!”
This led to the arrest of the men to be later named the Big Six: Danquah, Nkrumah, Ofori-Atta, Obetsebi-Lamptey, Akufo-Addo and Ako Adjei. It was their arrest after the riots that ignited the fire of nationalism among the peoples of the Gold Coast nationwide. But history has been most unfair to R S Blay and James Quist-Therson who were detained on 13 March 1948, two days later, and so missed by a tiny margin their rightful inclusion in the group marked by history as the leaders of our liberation struggle.
The Watson Commission was then set up to “enquire into and report on the recent disturbances in the Gold Coast and their underlying causes; and to make recommendations on any matter arising from their enquiry.” During its sittings, an unstoppable kind of nationalism gripped the nation. The Watson report led to the formation of the Constitutional Committee under Mr Justice J Henley Coussey. Its mandate was to “To examine the proposals for constitutional and political reform in paragraph 122 of the Report of the Commission of Inquiry into Disturbances on the Gold Coast, 1948, and due regard being paid to the views expressed on them by His Majesty’s Government and to consider the extend to which they can be accepted and the manner in which they can be implemented.” The independence train was fast on the move.
The Convention People’s Party was launched in Accra on Sunday, 12th June, 1949 – almost two years after the UGCC. In the words of J B to Nkrumah, “the very name ‘United Gold Coast Convention’ was devised by me and Willie, which you subsequently filched for the name of your party, Convention People’s Party.” Thus, to adopt the day of the inauguration of the UGCC, August 4, as Founders’ Day pays tribute to the CPP and its founder.
Mr Nkrumah himself admits in the first page of his book ‘I Speak Freedom’ that there was “a considerable political awakening in the Gold Coast between 1919 and 1947” before he returned to Ghana.
Yet, as a hint of his own issues with according due credit to others, Nkrumah turned around to claim on page 53 of his other book ‘Dark Days in Ghana’, (1967) that it was he who launched the nucleus of the UGCC in Saltpond – but he shifts this monumental event by more than four months to December 29, 1947 to fit with his return to Ghana.
As Prof SKB Asante says: “Osagyefo perhaps unconsciously, makes the date of confirmation of his appointment as Secretary-General of the UGCC, which was December 29, 1947, appear to be the date on which the organization was actually launched.”
In the words of Prof Kwame Okoampa-Ahoofe, “Dr Danquah emerged into national spotlight during the mid-1920s, there was no formidably organised, broad-based political apparatus clamouring for the imminent overthrow of the British colonial regime. There had largely been ethnic groupings such as existed in Fanteland, mainly in the Cape Coast-Anomabu-Elmina district of the Gold Coast littoral, as well as several others in the central and northern halves of the country. It was Danquah who was to lead the United Gold Coast Convention (UGCC) to pose a systematic and formidable counter-force to British imperialism, from 1947 onwards.”
This, of course, is not to disregard the work of men like Ephraim Casely-Hayford nor to dismiss the role of Nkrumah. But as we continue to consolidate our democracy and seek to empower our people, we should guard against elevating one individual above all others, and instead recognise that our independence was won by a collective determination that brought together people across the Gold Coast.
President Mills is free to create another public holiday and in honour of Kwame Nkrumah, Ghana’s first President and the world’s renowned Pan-Africanist. But, what he should not attempt to do is to call it Founder’s Day.
However, if we are to create a ‘Founders’ Day’ to mark the work of those who brought this about, it should commemorate a date which marks the efforts of all our founding nationalists rather than the birthday of just one – it should be a Founders’ Day, not a Founder’s Day.
This article first appeared in The Statesman of Monday 23, Feb. The author, Gabby Asare Otchere-Darko, is the Executive Director of the Danquah Institute.
IS NDC BACK TO SIGNALLING LEFT, TURNING RIGHT?
Gabby Asare Otchere-Darko
In typical Orwellian style, the scandal in London today over the MPs and Ministers allowance claims and in Mills’ Ghana over ex-gratia, 607 cars and plush lands in Accra can be best described as a political culture reminiscent of the Inner Party in the system of “oligarchical collectivism” described in George Orwell’s classic satire, Nineteen Eighty-Four.
Writing in the Telegraph of London this weekend, Mathew d’Ancona (Editor of The Spectator) said, the ruling Labour Party promised Britons a new era of fair play, but “Gordon promised so much as custodian of the nation’s ethics. He knew that his authority would never flow from novelty or charm. So, flourishing his moral compass, he pledged a system – governmental and social – based on fair play… fair play, playing by the rules. This mantra has been at the heart of Brown’s political message. And yet his ministers, and even he himself, have made a mockery of that mantra.”
As President Mills and his Foreign Minister were meeting their British counterparts last week, with Alhaji Mumuni holding his palms obediently (like a good African boy before his masters) behind his back, David Miliband was being exposed for claiming £199 for a pram and £80 for “baby essentials”. Gordon Brown had reimbursed his brother, with whom he shares a Westminster apartment (not No. 10 Downing Street), £6,000 a year from state funds for the cleaning of the flat.
Thanks to the Freedom of Information Act, British taxpayers did not have to wait (like here) for a change of government to find out how their MPs and Ministers are claiming for every expense from £1.60 for biscuits, lilies, carrier bags, lemon, make-up mirrors, toilet seats, nappies, women’s toiletries and all to £130k in paying mortgages.
For example, Baroness Thornton, a Labour minister in the whips' office, has been claiming £22,000 a year in expenses by saying that her mother's bungalow in Yorkshire (north) is her main home. As a result the peer, who has a £1m house near Hampstead Heath (London), has been able to claim around £130,000 since 2002. Also, Stephen Byers, the former cabinet ¬minister, has claimed £125,000 in expenses for a home which was owned outright by his partner, where he lived rent-free.
The Brits, like us, have grown angrily accustomed to the perception of how senior politicians are milking the system. Their MPs, who get paid between £60,000-£120,000, have selfishly exploited the use of MPs’ allowances to maximise their personal benefit. Indeed, some buy plush homes, through housing and mortgage arrangements supported by the state, have them furnished and refitted by the taxpayer only to sell them for profit and acquire another one to start the exploitation all over again.
Ironically, in the UK today there is talk of the state building homes for MPs whose constituencies are outside of the capital as a way of stopping them from abusing the allowance system which has the state supporting MPs with payments for their second homes in London. The practical check for the Brits in doing what we do here is the sensible recognition that it would be much more expensive to have state houses for MPs than help them own their own homes. So to them state-built homes is a non-starter.
In the view of Alistair Graham, (chairman of the committee on standards in public life from 2004 to 2007), the fundamental problem is that a culture has developed over many years, where there was a strong sense of grievance about backbench MPs' pay being too low, and therefore a culture slowly developed within the House of Commons of saying: “Well, if we can't give you the pay, then we'll do what we can to give you a generous expense system.” Yet, the abuses are not by any means limited to backbenchers.
Grahams points out, nevertheless, that there is a complicit cross-party approach where everyone has agreed it is too difficult to do anything about pay, and instead they have concentrated on improving the allowances.
The situation in the UK is not that different here where Ministers and MPs are also relatively poorly paid. I believe we cannot pretend any longer. While it is understood that MPs poor pay is only reflective of a wider national poor-pay system, we can begin the cure with the MPs and Ministers. And, let us move away from this socialist overhang where the state has to provide everything for its senior staff, from homes, through cars to servants.
MILLS ON BBC
President Mills chose to use his global audience on BBC World last week to defend his decision to go to the IMF/World Bank to “bail us out”. Of course, he was not interested in saying anything that could let investors look this way for fear of giving credit to the NPP, like ‘in spite of the financial difficulties and a huge fiscal deficit, Ghana registered the biggest read GDP growth in Africa in 2008. Our infrastructure has vastly improved.’ In fact, he even distorted the facts about the fiscal deficit by maintaining that it was 15% of GDP.
Kwaku Kwarteng, Communications Director of the NPP, pointed this out on Shamima Muslim’s Saturday breakfast show on Citi FM. The response from Agyenim Boateng, Deputy Information Minister, was that government has since the budget was read seen additional facts and that the revised deficit is now 15% (including divestiture receipts)! I thought that was a sad moment for Ghana. Rather than spinning why the President disingenuously chose to ignore the real fiscal deficit of 11.5%, the Information Minister felt the only way he could defend his boss on that front was to tell a greater lie that the government has now revised the figures and the true picture is that of a 15% deficit. When you have Information Ministers who believe their job is to tell outright lies rather than dabbling in the accepted practice of spin then we have a major problem.
But, I am happy for Ghana if news that the recent Spring Meeting of the International Monetary Fund and the World Bank in Washington, DC, has earned Ghana about $3.2 billion. About $2.2 billion of the amount is expected to come from the World Bank essentially for budget support programmes, while the remaining $1 billion support from the IMF is to shore up the country's foreign exchange reserves, we are told. What exactly is ‘shoring up foreign exchange reserves’ mean? It is recalled Dr Dufuor, Finance Minister, recently held a press conference, where he lambasted NPP and the central bank for doing just that in the last couple of years after redenomination. Now he goes to Washington only to be told that he will be given $1bn to do the same thing!
POPULIST MILLS
Mills was quick to make an unnecessary populist point on BBC that the expected money was not meant for the pockets of his Ministers or to buy cars but for the people of Ghana. How profound! He was also quick to defend his readiness to paint a negative picture of the economy with the explanation that investors prefer ‘transparency and honesty.’
Well said, Mr President. My only request to you, Mr President, is to extend this ‘new’ culture of transparency to cover the details of the negotiations your government is having with the Bretton Wood institutions. I heard you say on BBC that the two institutions have moved away from the so-called Washington Consensus regime of careless textbook neo-liberal prescriptions and now offer loans and grants on relaxed terms. You are essentially telling us that there are no conditionalities. This point had earlier been volunteered by Kofi Tsikata of the World Bank in Accra, who says that Ghana already has $1bn of unclaimed funds form the Bank. What he failed to mention was why those monies were left unclaimed by the NPP and whether or not the conditions (or paper work completion) that the NPP could not meet to claim the cheap money have significantly changed at the bureaucracy level for the new government to fulfil its part with ease today?
It should be recalled that in the 1982/83 IMF meetings in Toronto and Washington with the PNDC, the talks centred on exchange rate adjustments, monetary and fiscal policy and external debt management. According to the economist Kwame Akonor, the main sticking point then was the issue of devaluing Ghana’s grossly over-valued currency. The IMF wanted immediate and massive devaluation, the PNDC, fearing the political repercussions of devaluation and coup, called for gradual devaluation. The compromise was in the form of the temporary multiple exchange rates system.
When the PNDC announced to the country the transitional, multiple exchange rate for the cedi, it stated, dishonestly that the currency was not being devalued when in fact it had. PNDC member Aanaa Enin said at the time, “The government has not devalued the cedi but had rather readjusted it to meet the economic conditions of the times.” Hmmm.
On April 21, 1983, the PNDC read its first major budget and devalued the cedi by 1000%! It was this budget that launched the Economic Recovery Programme, which was essentially the result of the instructions given to the government from the previous February IMF meeting.
Ghanaians know the (P)NDC to be a group that signals left and turns right, causing confusion and collision to the traffic of national development. In the coming months and years, Ghanaians are likely to see the NDC redefining the workings of Social Democracy, the same way, one suspects, the redefined their Afro-Moses wearing Communism of the 80s. This time around the pressure from the IMF is on reducing the huge fiscal deficit and the slashing of subsidies to utilities and other social interventions. Little is being said about the real and deep causes of our burgeoning balance of payment or trade deficit.
But, who in the NDC has the voice to point out to the IMF and WB that the stimulant packages announced by the Obamas of the developed world speaks directly against the fiscal discipline they are asking us to abide by? Mills was happy to announce to the world that he has subsidised fertiliser by 50% - of course, there was no need to add that he was merely continuing a useful policy of his predecessor, Kufuor. Productive subsidies must be protected like Ghana’s sacred cow. There is wisdom certainly in slashing consumptive subsidies but there is no wisdom in cutting down on infrastructural expenditure. Like how the Great Depression and World War II gave credence to Keynesian economics, the credit crunch has done same, to what I described a couple of years ago as neo-Keynesian economics, a concept behavioural economics will sympathise with. We have been struggling for decades with meagre ‘stimulant packages’.
My suspicion is that President Mills and his Ministers don’t give the impression they are the kind to be expected to do anything radical to stimulating the agenda for a better Ghana. We are likely to see them once again signalling left and turning right, with the hands of the IMF firmly but ostensibly loosely on the steering wheel. T B help us!
The author is the Executive Director of the Accra-based think tank, Danquah Institute.
qanawu@gmail.com
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