Government has directed the minister of finance to begin engagements with the IMF
In Africa, it’s taboo for a young person to tell the elderly the truth, immediately you do that, they say you are disrespectful. But there’s one thing about the truth, it pains, it hurts but it cures.
Read full articleIt is the current vice president, H.E. Dr. Mahamudu Bawumia who said that if the fundamentals are weak, the exchange rate will expose you”, and this statement is true for politics and business. So Ghana’s decision to go to International Monetary Fund (IMF) to get a bailout has given us all an opportunity to diagnose the problem and share our views as to how to move forward for young Ghanaian entrepreneurs.
This is also timely because this is the only time people in power can be sober to do introspection. In Africa, you don’t advise three people, 1. One in love, (people who love their party will not see anything wrong in what they are doing).
2. One with power (Those with power think they know everything and can do anything they want) and
3. One who is rich (the rich person thinks he is the wisest of all that’s why he is richer but wealth doesn’t mean wisdom). In a continent or country where the youth population is about 50%, the concerns of the youth cannot be ignored if indeed we want to develop. Most African leaders (in business and in Politics) have contributed to unbearable conditions faced by the youth, and not much has been done to improve on these conditions.
Government Interventions
Most leaders have agreed that youth entrepreneurship is the way to go but none has given the political will or the funding or the necessary conditions to ensure graduates go into entrepreneurship right from school. The ‘big’ businessmen and women take advantage of the system to create a monopoly and not empower the youth to be independent. They value profit over development and impactful businesses and dealings which will not affect the environment, or the climate and which will give jobs to the youth and create a peaceful environment for all.
Governments over the years in Ghana have set up many agencies to support youth entrepreneurship but all have been used to support party foot soldiers and the purpose for which it was established has been defeated. For example, National Builders Corps (NABCO) is a temporary solution to a permanent job program and thus not sustainable, National Youth Authority (NYA), Microfinance and Small Loans Centre (MASLOC), National Entrepreneurship and Innovation Program (NEIP), Youstart etc.
E-levy was also to support the youth but most of the youth ends up paying for the levy and it’s affecting small businesses. This is because mobile money payment has been used mostly by these young entrepreneurs to do business and the levy actually is taking a toll on them.
So whilst most countries now seek a bailout from IMF, the biggest question is how it will impact on the youth of Ghana. The Government of Ghana has also deployed certain policy interventions to ameliorate the plight of the young Ghanaians including Covid Relief funds, free water and electricity, You-start, E-levy among others. The question is what have been the effects of these interventions?
Very low because the real entrepreneurs in Ghana did not get the relief funds, the much taunted Youstart program never started. YouStart initiative, as captured in the 2022 Annual Budget would support youth-led enterprises with, soft loans of up to GH¢50,000 to help start-ups (in particular by young graduates and school leavers) and small businesses to expand, Starter packs (Soft loans tied to equipment acquisition) of up to GH¢50,000 for individuals and GH¢100,000 for associations and groups and a standardized loan package of between GH¢100,000 to GH¢400,000 at concessional rates for SMEs from financial institutions. In short, we are in the middle of the year and nothing has happened yet. In the nutshell, the much taunted Youstart never started.
Global Crisis and IMF
Ghana’s stated reason for going to IMF is not the only reason in my perspective. There’s this story about the spider when he accompanied the lizard to his in-laws' funeral. During the final funeral right, the lizard with his friend left for the village and on their way, they spotted a creature. The Spider enquired the name of the creature and was told it’s called “touch and cry”. Curiosity they say kills the cat but in this case, it was going to kill the Spider.
On their way, he asked the lizard if they are not at the funeral grounds yet, and the Lizard responded in negation. But Spider said he wants to start crying, because he is pained by Lizard's in-law death, and wants to start showing how he cares so he started weeping. He wept till the funeral was over. There’s a saying that “never cry more than the bereaved” but the Spider went against this. Unknown to the Lizard, the spider had touched the scorpion (Touch and cry) and it bit him. The pain was a results of the scorpion bite not a result of the funeral.
So the global crisis is one reason why Ghana would go to IMF but the next reason is mismanagement of the economy and lack of investment in the youth. Common economics teaches us that we don’t borrow to spend, but what do we see? Why won’t the IMF give us strict rules? This IMF program will come with strict conditions to stabiles the economy and it will probably be for a period of 3-5 years.
The global crises hit us because we are not independent, we depend so much on importation from other countries. Even with food, with arable lands, we do not support youth to go into agriculture. We import wheat and other cereals from Ukraine. We import more than we produce locally and fewer efforts are actually given to it local industrialization. The issue with Covid that affected Africa was not health-related because most African countries did not have covid-19.
We have a saying in our language that “if the head of the cow is not well cooked, you don’t have to add the legs”. Our cow head was not well cooked yet we added the legs to it. The problem of unemployment, poor standard of living, and lack of support for entrepreneurship was already there and then global crises came to hit and worsened it.
Going to IMF for the 17th time, all the 16 didn’t create jobs, didn’t support youth to go into entrepreneurship, so how sure are we that this will help. The loan will just be used to pay the salaries of government workers and do a few interventions and then we go into the vicious circle of poverty.
Youth Situation
We have a saying that when it’s raining, those at the top or the tall people will feel it first. The short ones feel it later. But when there’s a flood, the short ones drown first. This is to say when it comes to benefiting from a good policy, the ‘big men’ get the lion's share but when there’s a problem or trouble the juniors or the poor ones become the first victims. Lucky Dube said, “we are the victims all the time, we get double trouble all the time”.
In the pre-covid era, youth unemployment in Africa was high. In post-covid, it worsened. The big question is how can the SMEs (Small Medium Enterprises) survive post covid?
In the developing countries, the unemployment rate has worsened, the entrepreneurs or those in small-scale businesses have not hit hard and Ghana is not an exception. We are already talking about African Free Continental trade when most young businesses have been shut down. We are talking about AfCFTA when borders are closed, coupled with rising fuel prices. Despite the increased cost of living workers' salaries and allowances have not been increased to match up, and no wonder some groups are already asking for COLA (cost of living Adjustment).
We have a saying in “Waali” that when those who lie with their heads up, do not see the sun, how much more are those lying with their face down? This is to say that the conditions for young entrepreneurs, the unemployed graduate is worsened by these economic conditions and no relief package for them. Crime is on the rise and our security is at risk, and immediate intervention is needed to solve this problem.
Solution
There must be a commitment from our leaders for us to solve this issue holistically. So this is it, the leaders always look for shortcuts and that’s the reason why we are all suffering. Businessmen look for shorter ways of making quick money, contractors do shoddy work to increase their profit margin, the police take advantage of the law, the banks only lend to the government to enjoy cheap profit, and every sector is trying to make a quick and higher profit to the detriment of the chicken that lays the golden egg. Is a whole system overhauling that we need not only in Ghana but in Africa?
Society grows when old men plant trees they know they won’t sit in the shade let alone enjoy the fruits. Today, some men cut down trees they never planted to build houses. We have good policies including “Ghana beyond Aid” yet we us the back door. As such few years down the line, we go back for aid. We should do trade, not aid. Eat what we produce and produce what we eat. If we have plans that will help us in the long run, youth-focused programs will be more helpful than self-interest programs. We need to stop tickling ourselves and laughing and immediately take the following steps;
1. Immediately there’s supposed to be relief fund for young entrepreneurs’ not party foot soldiers.
2. We have to create jobs for the youth through massive industrialization (like Osagyfo Dr. Kwame Nkrumah has envisaged. One district one factory is good idea but we all know the implementation was wrong.
3. Pushing the youth into agriculture to feed ourselves like the Gen. Acheampong’s slogan (Operation feed yourself). Planting for food and jobs is good project but we all know the politics around it didn’t make it see the light of the day.
4. Training and giving the youth access to finance to go into entrepreneurship
5. Full implementation of African Free continental Trade (AfCFTA) –means drive to open up our borders to promote trade among Africans.
DEVELOPMENT BANKS AND LOCAL BANKS
After having been first conceived in 2017, the Development Bank Ghana (DBG) was finally launched purposely to help catalyze the growth in the country’s small and medium enterprise sector. Access to funding for entrepreneurs is always an issue, especially in Africa.
With our government interventions not reaching the youth, and the local banks not assisting SME’s we are excited about the setting up of the new Development Bank of Ghana launched last year by H. E. Nana Addo Dankwa Akufo Addo. We have information that the bank is financed through a consortium of loans from international lenders including the World Bank ($250m), the European Investment Bank ($170m), the German state-owned development bank KfW ($46.5m), the African Development Bank ($40m) and the government of Ghana ($253m). The DBG has an initial $700m to loan to private financial institutions – including CalBank, CBG, GCB and Fidelity Bank – who in turn will on-lend to SMEs.
We have already contacted DBG about how our SMEs can get funding and they referred us to their partner banks. We have been told that are yet to receive the funds. However, we are optimistic, holding to it last the straw of a drowning man, that struggling for funding among young entrepreneurs would be a thing of the past. We know our local banks and the frustration we go through to access loans for businesses and young entrepreneurs, and how they use their local banking attitude to turn most SME’s away.
This is the reason why I said that not only political leaders have to be blamed but all those in the chain. Because it’s a system and any weak link will cause ineffectiveness to the system. We have seen monies given out by international donors and development partners to banks for the youth and SMEs which was never given to them.
We have seen and heard bankers diverting funds and taking advantage of the system and thus trade with the government to make higher profits. So we shall be following closely to see the outcome of this DBG. We will not hesitate to take expose anyone or any financial institution that makes it difficult for SMEs to access the funds to do their business.
We are calling on all SMEs to join hands with our federation to start the process of requesting funding to support their businesses not only from DBG but also from Africa Import and Export Bank (Afreximbank), as well African Development Bank (Afdb).
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