President Akufo-Addo’s govt commences 2nd term economic game plan

Having secured a second term in office – albeit this being contested by the opposition National Democratic Congress – President Nana Akufo-Addo is already planning how to execute his plans for Ghana’s economy from 2021 to 2024 and leave an unforgettable legacy. Considering how committed he has proved to be with regards to structural change for the economy his legacy will certainly be unforgettable; what is still uncertain however is whether this will be because of the positive changes the ongoing transformational policies is wreaking or whether it will be because the transformation will ultimately prove to be a negative one.

Most economic commentators however are already giving the President the thumbs up for sheer effort – structural economic change has long been identified as necessary but successive administrations in the past have failed to muster the political will to implement change especially considering that few positive results can be achieved within the four year political cycle that constrain the policies, programmes and policies of elected governments in Ghana.

For instance, point out the President’s supporters, the large resources spent so far by his administration on developing a modern, functional railwa1y system have gone largely under the radar of the electorate because the infrastructure is still far from complete. This type of public expenditure has been politically risky – indeed which explains why no previous administration has tried to develop the railway system with Ghana’s own resources – but now that President Akufo-Addo has got away with it, having secured a second and final term in office, he can pull out all the stops with regards to public spending on medium to long term infrastructural projects, since he will never have to answer to the electorate again.

The situation is not quite as simple as that though – his party will pressure him towards populist policies that promote the political standing of whoever succeeds him as the New Patriotic Party’s flagbearer. But Akufo-Addo is his own, man – as evidenced by his insistence on taking Vice President Mahamudu Bawumia as his running mate for his first two attempts at winning the presidential elections despite protestations by many senior party bigwigs – and after seeking to become President for nearly half of his entire life time, he can be expected to prioritize his legacy over his party’s subsequent electoral positioning.

Instructively, there are no headline policy promises in NPP’s 2020 election manifesto, unlike in 2016 when the promise of free Senior High School education served as the social intervention headliner and the One District One Factory initiative served as the flagship policy with regards to the economy.

Actually though the absence of similar headline promises for the second term is for good reason – the task of fundamental restructuring of Ghana’s economy as set out in the 2016 manifesto is one for the full two terms, which means that the second term will be largely devoted to completing the tasks begun during the first term.

For instance the digital addressing system, national ID card project and the compulsory tax identification numbering implemented during the first term are now to be combined to create an unprecedentedly wide tax net during the second term. Similarly the financial sector reforms implemented during the first term are now to provide the foundation for private sector financing of economic expansion and diversification during the second term.

Instructively, the last time such deep restructuring was attempted was with the liberalization of the economy through the Economic Recovery Programme which commenced in 1985. That programme was forced down the throats of a protesting populace – because of the short term negative effects – by a military dictatorship.

However, barely a decade later the medium to long term effects of that restructuring had shown themselves to be so good that the same erstwhile military dictatorship, having transformed into a political party under a pluralistic democracy, was able to sweep the polls at free and fair elections.

The President Akufo-Ado administration is now hoping that history will repeat itself for similar reasons as it attempts to take Ghana’s economy to the next level, in line with the country’s relatively new position as having a middle-income economy. To achieve this it seeks to build on its restructuring efforts started since 2017 rather than veering off on a new course altogether.

However the outbreak of COVID 19 has forced significant changes to the fiscal game plan.

“That COVID 19 has exposed our vulnerabilities as a nation cannot be over-emphasized” admits President Akufo-Addo. “It has however also revealed opportunities that we must seize. Together these have underscored the salience of the Ghana Beyond Aid agenda and an urgency to accelerate its implementation.”

Key to doing this is the closest thing to a headline policy initiative for the President’s second term: the Ghana COVID 19 Alleviation and Revitalization of Enterprises (Ghana CARES) Programme.

The initial stabilization phase of the programme is already being concluded, having been implemented from July to December this year. However the core of the prohgramme is to be executed over the three year period 2021 to 2023 and aims to restore pre COVID 19 economic growth levels 9of above six percent) and return the fisvcal deficit to below five percent as established by the currently suspended Fiscal Responsibility Act.

Through the Ghana CARES prohgramme, over the next thre years, government plans to:

Pursue the establishment of Ghana as a regional hub by leveraging the siting of the Agfrica Continental Free Trade Area in Ghana and will include the establishment of an International Financial Services Centre;

Review and optimize the implementation of the One DFistrict One Factory initiative, the Planting for Food and Jobs programme and free SHS that depend primarily on government’s budget finance gfor greater fresults, value for money and fiscal sustainability;

Complement the Planting for Food and Jobs initiative with a targeted programme to support the activities of the Ghana Tree Crop Development Authority in promoting selected cash crops, support commercial farming and attract educated youth into agriculture;

Build Ghana’s light manufacturing sector including the country’s capabilities to manufacture machine tyools to support industrialization;

Fast track the digitalization of government business as well as build a fdigitral economy;

And improve the operating environment for private sector businesses.

The Akufo-Addo administration estimates that the Ghana CARES programme will cost some GHc100 billion to implement and plans to fund a third ofv this itself with the rest coming from the private sector.

Indeed the re-elected administration’s game plan is predicated on using private capital to drive economic growth and development, in line with the philosophy of te J.B Danquah political tradition upon which the NPP was founded this is made all the more necessary by government’s lack of fiscal space.

Actually this is why the administration has put so much emphasis on the financial sector clean up; the game plan was to use formal financial intermediation to finance its flagship economic initiatives such as 1D1F and PFJ. But that industry was found to be lacking the requisite financing capacity.

Consequently the financial cleanup has been done with the plan that during the second term the financial intermediation industry can play the role assigned it.

However, while the industry now has the requisite financial muscle, COVID 19 has brought yet another snag as economic uncertainties thrown up by the pandemic have inevitably curbed the enthusiasm and confidence of both financiers and entrepreneurs. This is a problem which the re-elected administration will now have t work around.

Asserts President Akufo-Addo with regards to his second term in office: “Our number one priority is to stimulate growth, development and investment in the real sectors of the economy, particularly in agriculture, industrialization and digitalization by ensuring macro-fiscal stability. Consistent with our vision of building a Ghana Beyond Aid we will leverage the growing formalization of the economy to deepen and widen our ability to mobilize domestic revenues by continuing to broaden the tax base, simplifying the filing of taxes and improving collection regimes.

With regards to industrialization the government plans to:

Support made in Ghana products, including support for the use of local raw materials and local participation in the economy.

Here it intends to place more emphasis on Ghanaian participation along the supply and services value chains, in addition to mandatory local equity participation.

It will also aim at developing local technical capacity.

Make efforts to reduce the cost of power to make Ghanaian industry more cost competitive in West Africa. To this end it intends to review and restructure the energy mix to generate cheaper sources of power for industry including gas and renewable energy;

complete the re-negotiation of the existing power purchase agreements to reduce the take-or-pay commitments and the excess capacity charges that translate into higher power tariffs;

rationalize the fuel-mix for thermal plants on the basis of cost efficiency; improve efficiency by cutting down the technical and transmission losses of GRIDCO and ECG.

Continue to work with the private sector to establish more Special Economic Zones for manufacturing and support them with “last-minute infrastructure services.

Related to this an effort to develop strategic anchor industries. These have been identified as:

value addition to Ghana’s mineral and petroleum resources in petroleum resources, petrochemicals;

industrial chemicals based on industrial salt; iron and steel; aluminium and gold;

vehicle assembling, labour intensive light manufacturing; pharmaceuticals;

vegetable oils and fats particularly oil palm; industrial starch from cassava; and machinery and equipment.

Finalize the establishment of the bauxite refinery to complete the alumumium value chain;

Complete the establishment of an iron and steel industry through the Ghana Integrated Iron and Steel Development corporation;

Deepen and expand ID1Fto diversify and ensure national coverage;

Process more cocoa and shea-butter locally;

Produce at least half of Ghana’s sugar needs within the next four years;

Promote the local production of pharmaceuticals;

Complete the process of establishing a fertilizer production plant;

And for light manufacturing, renew the emphasis on component assembly not just for automobiles but for home appliances including electric fans, refrigerators and air conditioners to meet growing domestic demand.

For agriculture the re-elected administration aims to:

Accelerate efforts to modernize agriculture along the entire value chain, including expanding the Agricultural Mechanization Centres;

Support farmers through increased supply of inputs;

Enhance the involvement of farm extension officers to work with farmers and breeders;

Increase disease control;

Improve warehousing and post-harvest logistics; and tighten linkages with industry mainly through 1D1F.

With regards to physical infrastructure, the re-elected administration aims to significantly increase the use of local materials. Most roads in Ghana are constructed with asphalt overlay or with bitumen surface dressing and most public buildings are constructed with cement and concrete materials. However 90 percent of the raw materials for producing these two primary products are imported costing the country more than US$1 billion annually.

Government is now looking to leverage on the demonstrated durability and availability of local building materials, including burnt bricks and Pozzolana cement as substitutes.

One key plan of the returning government is to promote the creative arts industry as a growth pole. The industry comprises a vast array of talented and skilled people such as writers, sculptors, graphic designers, textile makers, dancers, actors, musicians and fashion designers. And the government has identified it as a sector with high potential for job creation, especially for the youth.

Building on the support provided the industry since 2017, the administration now plans to make Ghana a hub for film production in Africa, having already drafted a Creative Arts Bill which has been approved by Cabinet for submission to Parliament for enactment. The government also plans to set up a Creative Arts Fund to support artists as well as completing the theatre in Kumasi and constructing new theatres in Takoradi and Tamale.

Given that Ghanaian artistes do not have the capital to set up studios government intends, as part of its entrepreneurial hub strategy, to establish, in partnership with the private sector, large recording studios in Accra, Kumasi, Tamale and Takoradi. It also plans to build a digital platform for artistes to make their products available to the global market.’

Key to its efforts to accelerate economic growth through private sector activity, the government plans to build on its passing of key legislations during its first term in office (such as the new Companies Act and the Corporate Restructuring and Insolvency Act) as well as initiatives such as the introduction of open, competitive bidding for oil exploration blocks.

The second term in office should see the introduction of a risk-based licensing and inspection system and the removal of license requirements for all companies that do not pose any health risk or public safety risk. The administration also intends to further modernize the legal framework for business and investment including contract enforcement, the Borrowers and Lenders Act and the Construction Sector LI.

Crucially, the administration now intends to introduce a single business identifier for interactions with all government agencies to reduce compliance cost and time for the private sector. Other initiatives being planned include:

The setting up of a one stop shop that gathers together all agencies involved in the building permitting process for improved service delivery;

Reforms in land administration to accelerate adjucation of land disputes, completion of digitalization of land records and an electronic database for encumbrances, completion of the digitalization of maps and operationalization of an electronic geographic information system and increased geographic coverage of the Lands Registry;

Introduction of regulatory flexibility for micro, small and medium sized enterprises to improve post-COVID 19 compliance by introducing a specific tax regime for them; enabling them to do tax filing and payment online; and reducing the time for VAT refunds for all companies.

Importantly, it intends to prioritize efforts to retain and grow existing investment by providing targeted investor aftercare services to key foreign direct investors and anchor firms in Special Economic Zones and their lead local suppliers in order to preserve and expand supply chains.

There will be a lot to keep the President Akufo-Addo administration busy during its second term and its task may be further complicated by a second wave of COVID 19 infections as the latest data seems to suggest, which would require public policy responses that would slow economic activity and economic development programme roll out.

But first, the President has to put together his team for the second term, which may or not be closely similar to them composition of his first term team.

Economic transformation was never meant to be easy and Ghana’s efforts, being conducted during an effort to rebound from an unprecedented economic slump during an era of severely restricted fiscal space will be harder than most.