Africa’s rising star

economist.com top GDP growth 2013

The world’s 10 fastest growing economies in 2013. Source: economist.com

by Ben

Take a quick glimpse at any list of the fastest growing economies in the world and you are sure to see Ghana mentioned. Its growth topped 14% in 2012 and is forecast to return to a modest 8% in 2013, the same level as 2011. Ghana is the model of stability in Africa; this has been the base for its economic growth.

Ghana’s economy is powered by a service sector that accounts more than 50% of it’s GDP. It also has strong exports in gold, cocoa and oil. Like so many other countries, it was the start of oil production in 2010 that transformed Ghana into one of Africa’s fastest-growing-economies. The Jubilee field, which is 60km off the coast of Accra, has oil reserves of up to 600 million barrels and produces around 20,000 barrels a day. If targets are met (they haven’t consistently been so far), then the Ghanaian government estimates that oil revenue of more than $650 million will be added to the treasury.

Ghana’s continued growth and political stability have led to an increase in the number of expatriates who are returning home to capitalise on the opportunities now available. Ghana’s economic growth will fuel the growth of its own middle class – young professionals with families and desires for the latest technology and mod-cons. This new class causes the creation of a whole range of businesses to provide the services and products needed to support it – and so the cycle continues. Ghana’s position as the flag bearer for West African growth was seemingly cemented when in 2009 Barack Obama choose Ghana as the first country to visit on his first Presidential visit to Africa. The visit was acclaimed by the current President John Mahama as bringing worldwide attention to Ghana, if just for a moment.

The people we speak to Tamale attest to this change. An increase in the number of cars around the busy city centre, the opening of new bars and nightclubs, the rise of more and more telephone masts all seem to indicate it is happening. But outside of the city, in the rural communities we visit, we are presented with a very different scene. These are farming communities, reliant on a successful harvest, who are yet to reap the rewards of an 8% growth or the discovery of oil hundreds of kilometres away in the south. It is a stark reminder of the low baseline that even a stable like country like Ghana is coming from and the extent of the work still to be achieved.

It is worth noting though despite the scarcity of water, regular droughts in the Northern region and water shortages lasting days, water bills for Ghanaians are roughly £60 per year for access to the resource (15cd a month flat rate regardless of use). In the UK, where we face no such problems and our average rainfall far eclipses that of Ghana, it is expected that water bills will rise to nearly £400 per year for families. If the extra £340 is for knowledge that the water is drinkable (which it is here but it’s the pipes you can’t trust) then I’d rather the Ghanaian system where you can purchase 14litres of drinking water for about 50p, or the cost of one bottle of Volvic. That’s 11900 litres of exclusive drinking water (32 every day for a year) that you can afford on top of all other water costs i.e. baths, showers, toilet etc. Lets be honest I’m probably not going to drink as much as 32 litres every day, so could probably save myself some money. Guess we don’t have it all our own way.

Is global inequality inevitable?

by Ben

Ghanaian Cedis GHSOxfam recently claimed that the top 100 richest people in the world earned enough last year to end extreme poverty four times over – but is that really the case?

Philanthropy is on the rise, that’s for sure. In recent years a number of high profile US billionaires such as Mark Zuckerberg, George Lucas and Michael Bloomberg have publicly pledged to give away at least 50% of their wealth. Some individuals have gone even further: Warren Buffet has famously pledged to give away 99% of his wealth (est. $52 billion), mostly through the Bill and Melinda Gates foundation. The Gates name is synonymous with wealth but it is now the leading name in philanthropy. Their foundation has an endowment of $31 billion, of which an estimated $25 billion has come from Bill and Melinda Gates’ own personal fortune. That’s more than double the size of the United Kingdom’s foreign aid budget which sits at a respectable £6 billion.

Speaking of foreign aid budgets, the United States gives away a whopping $52 billion per year to poorer countries. China alone has invested $6 billion in African infrastructure as it looks to develop access to the continent’s mineral reserves, which it hopes will power its own continued economic growth. There is also a huge volume of money spent on institutions such as United Nations, World Food Program and World Bank, as well as countless charities and NGOs around the world working to improve people’s quality of life.

So with all this money flowing around, why aren’t things getting better? The $52 billion foreign aid from the United States is more than the GDP of 173 countries – surely poverty, famine and drought should be a thing of the past? Surely this money should be able to help alleviate people’s misery and fund accountable governments who have the best interest of their people at heart?

Well, lets look at a recent example. Over the last 10 years the largest example of an ongoing reconstruction project has been that of Afghanistan. The United States has spent $100 billion on aid and reconstruction projects alone as part of the effort to stabilise the country. $100 billion on a country with a GDP of $18 billion. Now of course there are some unique problems in Afghanistan such as the ongoing Taliban insurgency – but the Special Inspector General for Afghan Reconstruction stated that 85% of the aid budget had been wasted on overheads, corruption or simply poorly managed.

The same situation can be found in Iraq which was described as ‘the wild west,’ with funds being kept as freshly printed $100 bills. During the CPA‘s control of Iraq it was estimated that $8.8 billion was lost due to the lack of oversight. One story tells of an American soldier being asked to help the Iraqi boxing team get itself back on its feet but he gambled the money away. No one knew how many thousands he’d lost because there was no record of what he’d received.

Now I suppose it’s easy enough to discount aspects of those two examples to the unpopular administration in the United States however in both situations even with the countries holding their own free (well…) elections the problems continued. People were quick to their new positions of power and to hand out favours to tribe or family members. Jobs were handed out on a basis of patronage and not qualifications. Entire sects within the population such as the Sunni’s in Iraq or non-pashtuns in Afghanistan were sidelined by more populous and thus more powerful in electoral terms. The Afghanistan’s President, Hamid Karzai’s, brother who continues to hold a position of power despite being consistently linked with the heroin trade.

You see, the one thing that can be only be guaranteed from access to the vast wealth of the world’s top 100 earners is that corruption would prevent the bulk of it reaching those who need it the most. That’s not to say that we shouldn’t try; as I pointed out at the start of this article, a lot is being done but the answer is not to simply flood poor regions with money without first developing their own internal structures. Without a strong and independent judiciary capable of taking action against corrupt individuals and a legitimate government in the eyes of the people, we will see no improvement in the situation in the poorer parts of the world; this isn’t something that money can necessarily buy. Circumstances dictate that. The Arab spring is the perfect example of changing circumstances forcing a region’s governments to adapt to the needs of the people.

The other thing we must remember is that humans are by our very nature devious creatures. Even if you could theoretically level the playing field there will always be those willing to work harder than others, those who are smarter, faster, stronger and there are those who are willing to cheat, steal or even kill to advance their own agenda. There are those of us who are apathetic to money and those of us who think that we should never have to work a day in our life and we should be given everything. Inequality is inevitable. The question we have to ask is: at what level are we prepared for it to start? And we need to acknowledge that money is not the only solution.