According to the Bank of Ghana, confidence in the Ghanaian economy is very, very low. For example, the composite index of economic activity in real terms grew by a mere 2.2% in the first quarter of 2009, compared with 19.6% in 2008.
There is something very, very worrying happening in Ghana today. Just walk into any bank, where you have some respectable savings - and the staff are likely to ask you to shift all your savings into Treasury Bills. Just about a year ago, the same pretty lady who was trying to sell me a personal loan to finish my house is today selling me about 26% interest rate on 90-day T-bills.
Kennedy Agyepong puts it this way: "If all businessmen decide to take the investment of least risk and put their money in T-bills because the rates are good, who will create the jobs?” Not only is the environment bad for economic expansion, the armed robbers are also frightening investors. In the last two weeks alone there were 8 reported cases of armed robberies of factories in Tema alone. Former Abuakwa North MP had his factory, which exports forty or so containers of bolts, axles, etc every month to neighbouring countries being attacked, with one of his expatriate workers murdered by the robbers.
A sharp rise in unemployment this year may have a bigger impact on the relative living standards of those losing their jobs this time round, compared with the last four years because of the higher rises in the prices of goods and services. Figures from the Ghana Statistical Service Friday indicate that annual inflation rate rose to 20.56% in April, up from its five-year high of 20.53% a month earlier. Last year, in spite of the record hikes in oil prices and the global food crisis, inflation peaked at 18.4%.
Ghana requires an economic policy that generates jobs and stimulates the economy, while keeping inflation down. The situation requires the kind of economic pill that true social democrats should easily recognise – a neo-Keynesian formula of investing in job-creating infrastructure. In the absence of any such bold policies, the people who will most suffer are low-skilled, low-educated and young workers, who are already seeing a bigger deterioration in their job prospects.
While the Ghanaian delegation was meeting the IMF and World Bank at the Spring Meeting in Washington last month, so-called experts on youth and employment from Ghana, Kenya, Mali, and Colombia met at the weekend to discuss the growing problem of youth unemployment in Africa. The panel, chaired by Obiageli Ezekwesili, World Bank vice president for the Africa Region, could really only agree on one thing: that there are no easy solutions to the problem.
“Youth in urban areas are looking for jobs alongside thousands of others from the same schools, while rural youth are flooding into the cities looking for work,” said Sanoussi Toure, the Minister of Finance of Mali. “This is a tragedy. Our policies favour investment in education and training, but this investment has not led to job creation.”
The global economic crisis is expected to lead to a dramatic increase in the number of people joining the ranks of the unemployed, working poor and those in vulnerable employment. Businesses are going under, the International Labour Office (ILO), says in its annual Global Employment Trends report.
If there was any doubt about the tide of global financial crisis having a direct hit on our shores, then we got the news last week. For the first time since 2001, Ghana experienced a quarterly drop in inward remittances, to both organisations and individuals. For the first three months of 2008, $432.8 million was transferred to individual Ghanaians and families from abroad. Same time this year, the figure has dropped to $359.37 million. But, apart from money transfers dropping, the problems facing Ghana's economy today are problems that bedevilled the economy the last time the National Democratic Congress was in office. That was the time when Vice President Mills was head of Government's Economic Management Team (with John Mahama as a member) and Kwabena Duffuor was the Governor of the Bank of Ghana!
Let me quote from the speech delivered by investment banker Ken Ofori-Atta at the British Council last week: “Unfortunately the current situation is inimical to the average business person: inflation is climbing, the currency has weakened, our foreign exchange reserves have dwindled, government revenues are behind targets, and banks are being tentative about lending and getting into the old ways of buying Treasury Bills. Banks are unfortunately potentially setting themselves and the economy up for an adverse feedback loop, which contracts the economy, reduces demand for loans and thus compromising the financial industry. It becomes self-reinforcing and unleashes a vicious circle.”
He continued, “So these are issues that our private sector, after 7 sound years, is having to deal with again. In reality they are problems that predated the current financial crises.”
If Prof Mills and Dr Duffuor were listening, they couldn't have failed to take notice of the profound analysis of the problems made by Mr Ofori-Atta – that the problems facing the economy today predate the global financial crisis. In the economies where the crisis is most felt, interest rates have dropped to record lows. Yet, in Ghana, interest rates are rising and rising. There are threats of deflation (a decline in general price levels, often caused by a reduction in the supply of money or credit). Here in Ghana, the latest figures indicate that the 5-year record high year-on-year March inflation was beaten by the April figures.
For a party that says it believes in government intervention and for a party that said in opposition that the economy was in paralysis, to say we don't need a stimulus package is either a round-the-pitch way of saying 'we can't find the funding for it' or 'we don't have the ideas for it.'
“We shouldn't be immobilised as in my view there exists unique opportunities to make a transformational shift in our economy, even in these times. Almost every cardinal principle in the market-driven economy has been demystified by the current global financial crises,” said Mr Ofori-Atta, who was trying to be as diplomatic as possible in telling President Mills: 'Stop being dull and do something big and new!'
There is every indication that the unemployment situation will worsen in the next couple of years. The only area of hope is agriculture, and we pray that the Minister succeeds because, without it, youth unemployment has very little hope of going down.
Until then, Ghanaians should begin and continue asking this question, “Mr President, where are the jobs that you promised?”
Saturday, August 8, 2009
Mr president, where are the jobs that you promised?
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