Ghana must add value to raw products
20 August 2013, 09:10
Accra - Ghana must learn to process commodities locally rather than depending on exports of raw gold, cocoa and oil products to fuel its fast-growing economy, President John Mahama said on Monday.
The country is one of sub-Saharan Africa's brightest prospects because of its political stability and economic growth, which is forecast to hold steady at 8% for 2013.
But like many resource-rich African countries with weak infrastructure and a small manufacturing base, its economy depends on unprocessed exports for growth and foreign receipts, leaving it at the mercy of global price fluctuations.
Mahama said changing that dynamic is one of his biggest challenges and the country would not mature economically if he fell short, comments that ring true for nations across Africa.
"What we need to do is transform the structure of the economy from a largely import-dependant and primary-producer exporter into adding more value to the goods that we export," Mahama told Reuters in an interview in Accra.
"Transforming the structure of the economy in that way would help to accelerate growth."
The country of 24 million is the world's No 2 cocoa grower, Africa's second biggest gold miner and began pumping oil in 2010. With proposals on the table to set up gold refineries, Mahama said it wants to boost the share of processed cocoa it exports to 50 percent from around 28 percent.
One barrier to industrial production is an energy deficit, which has raised manufacturing costs and stifled growth.
Mahama said the government should take seriously the recommendations in a report the World Bank issued in July that was critical of government management of the power sector.
"We should ask: 'Can we produce a kilowatt of power as efficiently as other places in the world,'" Mahama said and added: "I believe there must be greater efficiency."
He spoke in the capital before the Supreme Court gives its verdict on an opposition challenge to the December elections, in which Mahama beat Nana Akufo-Addo with 50.7% of the vote.
Mahama declined to comment on the case. Most analysts say it is unlikely the court will rule on 29 August against his win, but the long-awaited verdict adds to political uncertainty.
The election handed Mahama, a former vice president, a full mandate after he took over the presidency in July 2012 when the incumbent, John Atta Mills, died in office.
Prior to that, Mahama was Communications Minister in the National Democratic Congress government. He has also written a well-received memoir that focuses on his own life and that of his father, a politician and businessman.
One threat to the country's growth is an 11.8% budget deficit. Mahama said he was very concerned about it but confident the government would meet its 9% deficit target for 2013.
"All the economic instruments we are currently using are meant to tame the deficit and bring it down," he said.
Although he said no date had been set for a reduction in government subsidies of utilities, another factor in deficit reduction, Mahama said he was confident the country would break a cycle of expanding deficits in election years. The next election will be in 2016.
The deficit should fall below 5% by 2015, he added.
Underscoring a push to finance infrastructure projects and refinance debt, Ghana sold $750m in Eurobonds in July.
While some economists were surprised by reports Ghana would return to the market this year, Mahama confirmed the government plans to issue multiple dollar-denominated bonds, each totalling between $50-$100m.
"We intend to go back on the bond market for specific infrastructure bonds, mainly targeting projects that have an ability to raise revenue and repay themselves," Mahama said.
The government would consider increasing its stake in oil projects with companies such as Tullow Oil, which runs the flagship Jubilee offshore field, but only on a case-by-case basis, he said, though declined to give details.
"The thing about upping government stake is that often when there is a call up for investment and your economy is still fragile having to take money and put it into production becomes a problem and so we will see how things go," he said.