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Ghana to promote local industry to boost economy

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(Globalpost/GlobalPost)

Ghana's president on Tuesday was heckled by opposition lawmakers while he outlined plans to boost the country's economy, as a free-falling currency sparks frustration over living costs.

John Dramani Mahama was repeatedly shouted down by detractors as he unveiled proposals to diversify the economy from an over-reliance on gold, cocoa and oil exports by boosting local manufacturing.

Among his proposals were new sugar mills and a factory to produce jute sacks to hold cocoa, as well as a government pledge to back Ghanaian farmers and the fishing industry.

Flour plants would be encouraged to use local crops, Mahama said, adding that he hoped the country would become a net exporter of rice "in the near future".

"The question we must ask ourselves is, are we as a nation to continue this unbridled importation?" he told lawmakers. "Were we born to be a nation of shopkeepers and traders?"

Mahama's intervention was the latest in a series of measures to shore up the once-buoyant economy and to reverse the slide of the cedi, which has increased the price of everything from eggs to fuel.

The local currency has lost nearly a quarter of its value since last year.

Analysts attribute the fall to a high deficit, a 28-percent decline in the gold price and the withdrawal of stimulus measures by the US Federal Reserve that has hit emerging market currencies worldwide.

Experts have also warned that Mahama's reforms must tackle structural issues such as ballooning deficits if the country is to deliver on its promise as the star of West Africa.

Mahama said Ghana remained "the most attractive investment destination in West Africa". But he recognised that the "basic structure of our economy has not changed since colonial times".

Razia Khan, head of Africa research at Standard Chartered Bank, said Ghana faces "a deeper underlying problem with fiscal management and that is the extent of the fiscal deficit".

Debt may soar to such unsustainable levels that Accra may have to cut back on other spending "that has a meaningful impact of growth," she warned.

Like many African countries, Ghana struggles with a bloated and inefficient public sector.

The government has to shell out nearly 12 percent of total economic output -- 75 percent of all oil revenue -- on the wage bill.

- Currency crisis -

The currency crisis has also sparked a dramatic shortage of dollars, prompting the central bank to tighten outflows of foreign exchange and to insist local business be conducted in cedi.

Khan dismissed that measure as a "short-term fix" but there are still some bright spots on the horizon.

Ghana has a young population and is eyeing a ramping-up of oil production above the current 100,000 barrels per day output once infrastructure improvements are made.

Many analysts forecast annual growth above six percent over the next decade, despite the structural flaws in the economy.

Nevertheless, the currency crisis is already having an impact on consumer behaviour as prices soar, Accra shopkeeper Eva Botchway told AFP.

"When someone comes here and wants to buy something... because of the increase (in prices), he or she cannot," she explained.

The falling cedi and rising fuel price has also hit lowly paid transport workers, said Benjamin Armah, who collects money for a union of drivers who ferry passengers from Accra's suburbs to the centre on dilapidated buses.

Bus companies have been forced to hike ticket prices to combat the rise in the petrol price, he said.

"People used to travel from outside to Accra to come and do business, but now the fuel price is high," he said, sitting next to a line of half-empty buses waiting for passengers.

"We are praying that the fuel price on the world market goes down."

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http://www.globalpost.com/dispatch/news/afp/140225/ghana-promote-local-industry-boost-economy