[ 2015-11-24 ]

Ghanaian Economy Slips To 14th In Africa
Ghana has been ranked 111th most competitive
economy in the world in the 2015 World Economic
Forum’s Global Competitiveness Index (GCI)
report. This places the Ghanaian economy 14th in
Africa.

The report, which assesses 144 countries including
38 African countries, placed Ghana behind
Mauritius, South Africa, Rwanda, Morocco,
Botswana, Algeria, Tunisia, Namibia, Kenya,
Seychelles, Zambia, Gabon and Lesotho.

The report assesses the economies based on 12 key
pillars: namely institutions, infrastructure,
macroeconomic environment, health and primary
education, higher education, goods market
efficiency, labour market efficiency, financial
market, technological readiness, and market size.

The 12 key pillars are further categorised under
three sub-indexes: namely basic requirements,
efficiency enhancers, and innovation and
sophistication factors.

The basic requirements as per the report include:
institutions, infrastructure, macroeconomic
environment, and health and primary education. The
efficiency enhancers also include: higher
education, goods market efficiency, labour maket
efficiency, technological readiness, and market
size. The third sub-index -- innovation and
sophistication factors -- include: business
sophistication and innovation.

A critical scrutiny at the report shows Ghana
performed unsatisfactorily under the basic
requirement category. With a barometer of 7, the
economy scored 3.9 in institutions, 3 in
infrastructure, 3.4 in macroeconomic environment,
and 4.5 in health and primary education.

According to the report, the quality of
institutions has actually been deteriorating in
both OECD and African economies according to the
GCI. This, the report says, might explain in part
why Africa’s competitiveness seems to have
stagnated in comparison to OECD economies.

“In Africa, a decline of security and
government efficiency -- two components of the
public institutions sub-pillar -- would appear to
be at the core of this decline. Sound public
institutions and governance are an important
prerequisite for economic development; against
this backdrop, their weakening -- as indicated by
the data -- raises questions about whether the
fundamentals are in a position that will put
growth on a sustainable footing,” states the
report.

This suggests that more effort should be made to
increase the capacity of institutional frameworks,
as they provide a critical foundation for the
other dimensions of competitiveness.

Commenting on infrastructure, which recorded the
least growth in this category, the report cited
“unreliable electricity supply” as the
major bottleneck hampering the continent’s
transition to higher-value-added activities,
adding that Africa -- based on a sample of 48
economies -- generates roughly the same power as
Spain, although Africa’s population is
nearing 1.1 billion while there are only 49
million people in Spain.

Clearly, Ghana is not left out of this serious
challenge, as the country is experiencing power
shortfalls like never before. The country
currently sheds between 400-600MW of power daily,
which has been blamed for low productivity and
job-losses.

In the area of macroeconomic stability, Ghana
scored 3.4 -- reflecting the country’s poor
macroeconomic stability. Current inflation rate
stands at 17.4 percent against the end of the year
target of 13.7 percent. The GDP growth rate
initially slated at 3.9 percent was revised to 3.5
percent after the start of a three-year IMF
budgetary support programme. The monetary policy
rate was recently increased by 100 percentage
points to 26 percent. The local currency is also
unstable against the major trading currencies,
notably the dollar.

Overall, Ghana was ranked 123 and scored 3.68 in
the basic requirements sub-index. On the
efficiency enhancers sub-index, Ghana ranked 89
and scored 3.78; and was ranked 68 in innovation
and sophistication factors with a mark of 3.62,
all culminating in 111th on the GCI.

The report recommends that for Africa as a whole
to climb on the GCI, quality of education must be
increased as it is essential to raising
productivity across all sectors.

Reducing barriers of trade is another
recommendation made by the report. The report
states: “The reduction of barriers remains a
critical component for increasing Africa’s
competitiveness. Beyond the poor quality of
physical infrastructure and high tariffs,
estimates show that 60 to 90 percent of trade
costs relate to non-tariff measures”.

Another recommendation is that governments must
develop and improve transport and ICT
infrastructure, since unreliable energy, an
ineffective urban-rural road network, and
inefficient ports are the main impediments to
better performance of the agriculture sector.

Source - Bus & Fin Times

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