Page 5 - AfrOil Week 21 2022

AfrOil COMMENTARY AfrOil

bna: Can Ghana find investors to scale up? to the markets is crying out for investment –
JJ: [LAUGH] Ghana has borrowed, bor- improving roads is a solution that could bring
rowed and borrowed. Ghana’s debt has been big returns on investment. Most roads in Ghana
downgraded to B minus and in some cases C by are not tarred, so it’s just a matter of getting
the credit rating agencies. bulldozers to grade them. This will improve the
bna: Why? movement of produce, especially now that we
JJ: Successive mismanagement of the are in the rainy season.
economy, both under the current ruling New bna: But investing in that would require more
Patriotic Party (NPP) and the former National borrowing?
Democratic Congress (NDC). Both parties JJ: Or reducing expenditure in other areas.
over-borrowed but for different reasons. The The government has refused to reduce expenses
former NDC government primarily spent enough to compensate for what is required.
money on politically motivated infrastructure They are flatly refusing to do away with free sen-
projects that were wrongly evaluated and turned ior high school because it would be a bad move
out to have low returns on investment. Also, politically. It is just the politics that makes it dif-
costs were overinflated, with an estimated 40% ficult. It is not rocket science. The government
of the projects’ costs leaked away in corruption. is bringing in some new revenue, but it is like
bna: And the current NPP government? trying to fill a hole that we haven’t yet stopped
JJ: Their crime has been borrowing for popu- digging.
list consumption, the largest cost being free sen- bna: Could Ghana better leverage its gold
ior high school. They borrowed to make it free, resources?
they borrowed to fund all manner of populist JJ: That is possible, because the investment
schemes like paying teacher trainees and trainee in gold comes from the private sector and com-
nurses’ allowances, all in the name of boosting modity prices are going up and will probably
the health sector and the education sector. But stay up for a while. But exporting gold is not
when COVID hit it was apparent that we were going to get us out of the hole we are in either.
heading for deep trouble. We have to take an axe to expenditure.
bna: What sort of trouble?
JJ: The government’s response to the coro- Austerity
navirus (COVID-19) pandemic was to bor- bna: So, austerity?
row even more to try to mitigate the economic JJ: Yeah, austerity, which is politically
effects. In 2020, when the global economy got unpalatable.
stuck, Ghana’s government provided free food, bna: And austerity does not bode well for
free electricity and free water for a huge segment Ghana’s new middle class?
of the population. But when we got to 2021 the JJ: The middle class is based on an economy
chickens came home to roost with the economy that is not grounded. We Ghanaians created a
experiencing a downturn. middle class by essentially spending more than
bna: When COVID restrictions were lifted at we earn. We created a middle class by borrow- Ghana does
the end if 2021 Ghana’s economy seemed to be ing and we can’t keep doing that. We did not
recovering? create a middle class by increasing productivity have a small oil
JJ: It only seemed like the economy was or increasing industrialisation or by providing
growing again because the economic base had services. We did do that to some extent, but not refinery, but it is
shrunk so much. Plus we were hit by an increase enough. not even working
in borrowing costs. Figures in the 2022 budget bna: Are any of Ghana’s neighbours better
show that salaries in 2021 made up 55% of all off? at the moment
government expenditures and another 50% JJ: The whole of West Africa is now at risk.
went to interest payments to service all the debt. Most countries in the region are over-indebted.
That adds up to 105%. Cote d’ Ivoire is in a slightly better position
bna: So there is no budget for the government than us. Nigeria is in a worse position because
to do anything? they are also faced with Islamic terrorism. To
JJ: Exactly. And now that we are being hit by the north in the Sahel, Mali has the same prob-
high food and fuel prices from the conflict in lems with Islamic terrorism, plus war and coup
Ukraine and drought in the Sahel there are no d’états. Burkina Faso has Islamic terrorism and
shock absorbers left to absorb these new exter- the same sorts of issues.
nal shocks. We need to rapidly scale up invest- bna: But these problems have been festering
ments in roads and the logistics sector so that for a while.
we can move what food we have from farm gate JJ: True. It’s the crop failures in the Sahel that
to market as efficiently as possible. It may seem are our immediate problem. Ghana traditionally
that the biggest driver of inflation is food prices. imports a lot from those countries – tomatoes,
But when you delve into the food prices, you see onions, ginger and various staples. All that is
that the problem is not farm gate prices; it’s the going to collapse this year. What little the coun-
increasing cost of logistics. tries produce they will keep, not export. So we
are faced with a loss of imports from the sub-re-
Importance of logistics gion and from the conflict in Ukraine. Plus we
bna: And could Ghana stop the price of logistics should expect a huge inflow of refugees from the
from rising? Sahel because of drought, starvation and Islamic
JJ: Definitely. The logistics of getting food terrorism. ™

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