Innovative development strategy for Ghana

Ghana’s economic progress over the last 20 years has been laudable. Economic growth has averaged more than six percent each year and the country is among the few in Africa expected to meet the Millennium Development Goal (MDG) of halving the poverty rate by 2015. This growth has also enabled Ghana to achieve lower-middle-income status, though unexpectedly, following the rebasing of its GDP figures in November 2010.
Economic growth is not equivalent to development, however, and despite significant growth and improvements in the quality of life, Ghana faces persistent development challenges that must be addressed to realize and sustain the benefits of a middle-income country. As shown by the constraints analysis undertaken for the U.S.-Ghana Partnership for Growth (PFG), high borrowing costs, unreliable supply of electric power and high transactions costs in land markets continue to be key binding constraints to broad-based economic growth. Beyond these major constraints, Ghana continues to face a number of specific challenges.

 First, while the rate of poverty has decreased significantly at the national level, rural areas have failed to achieve similar reductions in poverty (see Chart 1). Reports by the World Bank (March 2011) also reflect a strong geographic disparity in income whereby the poverty rate is about 20 percent in the South, compared to about 60 percent in the North. Addressing this geographic divide remains an area of great importance, as its reduction is necessary to achieve broad-based economic growth and development.

Second, while Ghana continues to enjoy strong economic growth, employment opportunities in the private sector remain inadequate to absorb the growing labor force. To achieve private sector-led growth that accelerates job creation and income generation, Ghana must improve access to credit, ensure a reliable power supply, and improve property rights related to land, among other challenges. In addition, current agricultural practices, expansion of the extractive industry, and climate change have contributed to deforestation, increasingly erratic rainfall, and coastline erosion.

Third, the production of oil presents an opportunity and challenge. The Government of Ghana (GoG) is keenly aware of the potential “curse or blessing” that oil reserves represent. While proven reserves of oil and gas place Ghana well below the production potential of Nigeria, Angola, or Equatorial Guinea, revenues to the GoG could be as much as ten percent of its national budget by the end of the country development cooperation strategy (CDCS) period can be a transformational event in Ghana’s history. Failing to do so, however, could result in a scenario with the potential to unravel the tremendous political, economic, and social gains made to-date. The decisions being made now regarding how to manage the development of the oil and gas sector will shape Ghana’s future and its role, stature, and place in the world community. The needs identified by the Ministry of Energy and the USAID-sponsored Oil and Gas Sector Needs Assessment include technical assistance to the government in the oil and gas sector; short-term workforce development and training for key staff in ministries and national companies; assistance in managing oil and gas expectations to realistic levels; and support to small and medium enterprises (SMEs) in the Western Region to provide goods and services to an industry with some of the highest international standards.

Fourth, Ghana has demonstrated its capacity to advance democracy through five successive peaceful elections, two of which were handovers to the opposition party. In the regional context, Ghana has also emerged as a leader in Sub-Saharan Africa, as Ghanaian institutions are frequently called upon to participate in international peace-keeping operations, elections monitoring, and conflict resolutions. Despite these achievements, the country is far from reaching its potential in terms of good governance. Weak institutions, a concentration of power in the executive, over-centralized authority, corruption, and narcotics trafficking problems present challenges to its efforts to provide the citizens of Ghana with the services they require to improve their livelihoods in a sustainable fashion. On the local level, three interlocking governance challenges are likely to dominate Ghana’s immediate future: improving service delivery to citizens; expanding public participation in governance; and accountably and transparently managing Ghana’s natural resources. Several factors constrain local government’s ability to effectively deliver services to constituents. These include the lack of capacity and support by central government to optimize systems for the management and collection of locally generated revenues, which constrains local government’s ability to finance service delivery and quality control activities; the late arrival of funds from the central government, which comprises the vast majority of local government’s fiscal resources; and local government’s lack of authority to hire, fire, reprimand, or reward the civil servants that support them. In addition, Ghana is challenged by conflicting legislation, parallel structures, overlapping responsibilities, and insufficient coordination between the government bodies at the national, regional, and district levels. Alleviating these difficulties could pay major dividends for Ghana.

Fifth, Ghana also faces serious challenges in the health sector. Ghanaians suffer from a high burden of disease, especially malaria, as well as still-high rates of maternal and infant mortality. Problems include low access, quality, and use of family planning and maternal, newborn, and child health services; micro-nutrient deficiencies; low use of interventions to prevent malaria and a lack of effective case management and diagnostics; high prevalence of HIV among most-at-risk groups and stigma against these groups and others living with HIV/AIDS; poor water quality and lack of access to sanitation facilities; mismanagement of health commodities and human resources; and overall weak regional, district, and community management systems. The primary challenge is to increase access to high quality services for those who need them and attain behavior changes to prevent morbidity and mortality. This requires a focus on service delivery at the community level, with a secondary focus on strengthening the health systems—human resources, finances, information, and logistics—on which quality services rely. Opportunities exist to focus at the household level; emphasize and clarify linkages among Maternal Child Health, Family Planning, malaria, and HIV funding and programming; reinforce linkages with donor programming; improve private sector participation; and address gaps in urban health care and family planning. In particular, while long-term trends in the infant mortality rate and life expectancy are encouraging, there is much room for improvement (see Chart 2).

Finally, access to education has improved, but quality remains poor. Over the past decade, primary school gross enrollment in Ghana has risen from 70 percent to 95 percent. The elimination of school fees, significant capital investments, targeted school feeding efforts, and private school expansion have helped bring thousands of new students into the system. This rapid increase in enrollment has placed enormous stress on system capacity. While concerted efforts by the GoG and its development partners may make universal access obtainable by 2015, the provision of quality education is a longer-term challenge. At present, roughly half of all students fail their basic education completion exam and roughly 70 percent drop out before obtaining a high school diploma. For those students who do complete school, many are ill-prepared to find employment or seek further education. This decline in the quality of education is reflected in the decline in the percent of trained teachers in primary education (see Chart 3).

Opportunities exist to support decentralization, the most effective way to identify and address local educational challenges and to promote accountability; to improve public sector and civil service management in order to effectively use limited resources to improve educational outcomes; and to leverage the private sector to reach educational goals.