Ghana, part 2. Quiet before the storm?

We are still working on a full Ghana update.

We got the data, but the policy environment is quite fluid and uncertain. Some signs point to crisis being imminent – re-emerging fuel shortages and water-levels in the main dams being dangerously near the minimum operating level.

Maybe the worst sign is government’s attempt to defend the indefensible, incl. stating that the exchange rate to the US dollar is 3.03. The market rate is around 3.6, and yet the Min. of Finance website has on it’s front page a story criticising media for stating that the cedi is the worst performing currency in the world in 2014 (admittedly, Bloomberg used the wrong denominator, and thus the depreciation is only 31%, not 40%).

At the same time, the current accounts deficit is closing, maybe due to a slowing economy. Possibly a good sign.

And more bad news: Ebola and a less-spoken about cholera outbreak is causing trouble for fruit and vegetable exporters with buyers being nervous about risks of transmission or merely that buyers are – unnecessarily – worried and will not buy Ghanaian produce.

Back to the economy: The September IMF mission and government’s response will be crucial. Our sense is that it’s crunch-time, with Ghana at real cross-roads. Will it be possible to take the progressive and high-growth direction? Or will the politics, the inevitable public protests and the temptations to take a short-term view win? The initial indications since the IMF announcement have been mix – with a number of government ministers stressing that there is no crisis.

What does this mean for business and future opportunities?

  • In the very short run, our main advice is to apply a “wait-and-see” position. We expect that many questions will be easier to answer in 2-3 months time.
  • For established businesses, operations will be slightly more uncertain. Supplies (energy, fuel) may be more erratic and if you are high-profile you may face more frequent populist pressures and scrutiny.
  •  If you are starting up, risks are higher. On the one hand, better deals may be possible, but equally, both short- and long-term uncertainly will be higher.
  • Security: We do not expect the main security situation to change significantly. There may be more street protests in Accra, but we do not expect more general violence or crime. This may change if the crisis is deep or spins out of control.
  • Long-term prospects are uncertain. Oil and gas production will increase and as such, growth will continue, even if there may be a dip in 2014 and 2015. However, if the growth in almost entirely driven by oil, the prospect for middle-class consumer goods will not be particularly good.


For  readers interested in politics and the fundamental drivers of Ghanaian politics, we strongly recommend having a look the a new article from the Effective States research project, link;


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