The 2016 New Patriotic Party Manifesto was based on the theme- Change: an agenda for Jobs; Creating Prosperity & Equal Opportunity for All. Winning the polls in December and subsequently being sworn-in as the 5th President of the 4th Republic, President Akufo-Addo is now left with the herculean task of translating these ambitious campaign promises into reality. His inaugural speech stated “Business is coming back to Ghana”. One particular section of the Ghanaian economy looking forward to the realization of these promises is the private sector.
The private sector has been touted as the engine of growth and creating the enabling environment for the sector to thrive will be a great start to reviving the local economy which is expected to see a growth rate of 7.4 percent this year according to Bloomberg. The third quarter of 2016 saw the year-on-year GDP expand by 4 percent, following a downward revised 2.3 percent growth in the preceding quarter according to Trading Economics (will create a link to this source). Industry saw a recovery of 3.9 percent from -6.5 percent in Q2; Services also gained slightly from 4.7 percent to 5.7 percent; Agric grew at a slower 2.3 percent to 3.6 percent. From 2000 to 2016, annual GDP growth rate in Ghana averaged 6.92 percent. It reached an al-time high growth rate of 25 percent in the first quarter of 2012. A record low of -3.80 percent was recorded in the first quarter of 2014.
Making the private sector attractive to draw the needed investments by local participants and through foreign direct investments require certain measures to be in place. The World Bank’s Ease of Doing Business Report for 2016 indicated a rise for Ghana, from 111 to 108 out of 190 countries. Ease of Doing Business in Ghana averaged 84.67 from 2008 until 2016, reaching an all-time high of 112.00 in 2014 and a record low of 60.00 in 2010. The Ease of Doing Report for sub-Saharan Africa saw Ghana ranking in the Top 10, coming 9th, out of 47 countries ranked in the region.
Quite impressive but much needs to done to see Ghana ranked among the Top 3 countries to boost investor confidence in the local economy. The Top 10 countries in the region are Mauritius, Rwanda, South Africa, Botswana, Kenya, Seychelles, Zambia and Lesotho. What policies should the government put in place going forward to ensure Ghana ranks in the Top 3 in Africa and Top 10 in the world?
LAWS AND REGULATIONS
The appropriate investment and business laws and regulations should be in place. If the existing laws and regulations are not business and investment friendly or are not in tune with contemporary practices, then amendments are needed to fine tune them to meet current trends and practices. Of course, it should not be done at the detriment of the overall long-term goals. Some laws on business registration and taxation should be business friendly. Taxing the private sector heavily will make the sector unattractive to investors. The table below lists some existing tax rates;
The private sector, especially SMEs contend that the above rates are exorbitant and taking a toll on their operations and the cost of running their business. Hence they would welcome a revision to ease the pressures on their operating expenses.
It’s refreshing to hear finance minister designate, Ken Ofori-Atta talk about his government carefully analyzing the tax cut promises before going ahead to implement. NPP promised to shift the focus of economic management from taxation to production in their 2016 manifesto and the private sector will be looking forward to breathe a sigh of relief if it goes ahead to implement it.
To do this, it seeks to revise taxes as follows;
Industry and business thrive on funds and a robust banking and finance sector will be highly sought after to contribute to this growth. Regulations on interest rates, base rates, exchange rates among other policies should be friendly to the business and investor communities. According to the World Bank, domestic credit to the private sector in Ghana (% of GDP) stood at 16.99 as at 2013. Domestic credit to private sector refers to financial resources provided to the private sector, such as loans, purchases of nonequity securities, and trade credits and other accounts receivable that establish a claim for repayment.
These rules and regulations should be friendly to the small and medium scale enterprises that form the chunk of the active players in the Ghanaian private sector. Access to credit is an age-old problem facing SMEs in Ghana and it’s about time the rhetoric gave way for concrete policies to address same.
Roads and highways, ports and harbours, adequate supply of electricity, proper addressing system, reliable water supply are among the basic infrastructure which should be available to create a robust private sector which propels growth. Attention should be given to the perennial power and water problems facing Ghana. The port expansion projects in Takoradi and Tema are good measures to ease congestion at the ports and also make Ghana a transit for our neighbors in the Sahel region in the sub-region.
In conclusion, the private sector can be supported by putting in place the right policies;
• Availability of Credit at competitive rates
• stable macroeconomic indicators- interest rates, exchange rates, etc
• business friendly rules and regulations
• broadening the tax base and not overburdening the private sector with excessive taxes
Author: Paa Swanzy-Essuman || email@example.com