ACET publication finds Ghana low on economic transformation in Africa

Economic transformation is key in ensuring a higher quality of life for citizens, but to achieve that, countries ought to make deliberate efforts to achieve that. Ghana, it appears needs to do more intentionally to transform its economy.

A publication by the African Centre for Economic Transformation (ACET) on economic transformation, paints a gloomy picture of Ghana sitting at the bottom of the pack in Africa.

According to ACET, the objectives of the Ghana Country Economic Transformation Outlook (CETO) was to assess progress and identify challenges impeding Ghana’s economic transformation by providing targeted, gender-responsive, and actionable recommendations for sustainable economic growth.

The CETO analysis uses the African Transformation Index (ATI), developed by the ACET. The ATI tracks key economic outcomes that characterize a transformed economy over time, using ACET’s “Growth with DEPTH” framework, which comprises five dimensions: Diversification measures the capacity to produce and export a broad array of goods and services.  

According to the analysis, since the year 2000, the Ghana’s transformation score has hovered far below the African average of 30.3, reaching a high of only 20.6 in 2014.

“A lack of synergy with higher-productivity sectors and insufficient investment in strategic sectors offer limited growth potential, affecting job creation and overall economic transformation. Diversification, a crucial catalyst for economic transformation, remains weak and is on a declining path,” the authors say.

The publication found that the last two decades have been a revealing period in Ghana’s industrialization regime, indicating that the various policies introduced after the economic recovery sparked hopes of growth acceleration, suggesting that sustainable development was finally in sight.

“However, such hopes were soon dashed. Economic growth has come with only limited opportunities, mostly propelled by a boom in the global demand for primary commodities that remain the backbone of the Ghanaian economy, and little synergy with the rest of the economy,” the study said.

Noting that the country’s path since independence has largely been shaped by untransformed colonial economic structures and unsustainable development policies, it said the industrial sector is plagued with a notably diminishing share of manufacturing in gross domestic product (GDP).

“Exports are mainly dominated by the extractives sector, which accounts for the largest share of foreign direct investment (FDI),” it added.

It further said productivity in the agriculture sector is set back by the predominance of low technology use, the impact of climate change, and limited market value chains.

It holds that patchy progress on technology upgrading reflects technologies in goods often from large-scale FDI project enclaves in technologically weak economies. From a structural transformation perspective, the industrial strategy has failed to diversify the economy away from production and export of primary commodities with little domestic value addition. Moreover, it did not promote adequate backward and forward linkages between sectors and industries.

It said the policies failed to develop innovation capabilities through synergies between industry and universities to propel research for industrialization. They also failed productivity increases needed to support sustained growth in average incomes, it added.

Acknowledging that economic shocks including the global financial crisis, collapse of the commodity supercycle, COVID-19 pandemic, and Ukraine-Russia war created further setbacks, revealing the fragility of Ghana’s health, education, and economic systems as well as of its infrastructure, it said the measures used to curb the spread of the pandemic and mitigate its impact aggravated economic hardships.

“Fiscal deficit and exchange rate depreciation have further deteriorated, pushing the country to the brink of debt distress. Consequently, unemployment, particularly youth unemployment, is at a historically high level,” it said.

The publication also noted that the effects of climate change and environmental risks, including air and water pollution from “galamsey” (illegal mining) activities and desertification, are visible to everyone, adding that, Ghana’s job transformation process has not been favorable to women, particularly in terms of their representation in formal employment.

It explained that high informality and low education among the female population are reflected in their disproportionate representation in the lower echelons of economic sectors like agriculture and services, with women often facing significant barriers in accessing essential economic resources such as credit, land, and education.

“These constraints and the lack of access to decent employment opportunities not only hamper women’s economic empowerment but also reduce their influence in policy decisions. Therefore, Ghana, like most African economies, must devise coping mechanisms and adaptation strategies to build and enhance economic resilience in readiness for future shocks,” the publication said.

By Emmanuel K Dogbevi

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