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On the road to middle class: A look back and a look ahead for Ghana

Vasco Molini's picture

 A look back and a look ahead for Ghana
 
I have vivid memories of my first trip to Ghana. It was in July 2006 and I was in the country to do a research on Ghanaian farmers. It was in Accra, where I watched my team, Italy, win the FIFA World Cup final against France. Other than being a lucky charm to me, I thought Accra was a nice and safe town but,I felt that it had the potential to grow.

When I came back seven years later, I was pleasantly surprised by the changes. The city was dotted with new buildings, new roads, and had a really buoyant atmosphere. Of course, Accra is not representative of the whole country, but according to a recent report that Pierella Paci and I presented in October, growth and poverty reduction have been widespread in the country. 
 
Now you may ask as to how Ghana was able to achieve this. In our report, Poverty Reduction in Ghana: Progress and Challenges, we show that sustained and inclusive growth in the last twenty years has allowed Ghana to more than halve its poverty rate, from 52.6% to 21.4% between 1991 and 2012.( Note: For comparing 1991 and 2012 poverty rates for both absolute and extreme poverty, the study used the 1999 poverty line. Official poverty rates use the new poverty line re-based in 2013.) The impact of rapid growth on poverty has been far stronger in Ghana than elsewhere in Sub-Saharan Africa. Indeed, until 2005 for every 1% increase in GDP in Ghana, the incidence of poverty fell by 2.5% — far above the Sub-Saharan average of 1.6%.

Its remarkable achievements in poverty reduction were made possible by diversifying the economy beyond agriculture while improving access to basic services, including education, health and electricity. This is reflected in the raising skill-set and educational attainment of the Ghanaian labor force, which has become increasingly mobile as the economy continues to shift out of agriculture and rapid urbanization encourages greater employment in services and, to a lesser extent, industry. Meanwhile, improvements in agricultural productivity, driven in particular by cocoa and other cash crops, have facilitated structural transformation, though the sector still remains the main source of employment in the country.   

As our report warns, however, future efforts to lower the incidence of poverty in Ghana will require containing regional disparities and vulnerabilities, as well as broadening access to opportunities for all citizens, particularly those in the north. Indeed, location has been found to be a major contributor to poverty in Ghana. Case in point – the rising income inequality between north and south is a striking demonstration of diverging employment opportunities across the regions. While poverty rates have fallen below 20% in the large area that spans Ashanti, eastern, Greater Accra and western regions, southern Brong Ahafo and coastal Volta regions, rates remain far above 40% in most northern districts.

Poverty is therefore increasingly concentrated in rural areas in the north, where one in three of the country’s poor now resides, compared to just one in five in 1991. Polarization, meanwhile, is also on the rise, as the top decile of Ghana’s income distribution now consumes up to seven times more than the lowest earners in the country, compared to five times more in 1991, and the Gini index – a number that is used to measure inequality - has increased by 8%, from 37.5% to 40.8% in 2012. Despite all this, Ghana still remains a relatively equal society in Sub-Saharan Africa, as its inequality measure is still well below the regional median and is one of the lowest among Africa’s most rapidly-growing economies.

Moving forward, if Ghana wants to sustain this growth trajectory that would help it achieve middle income status, it will require a new generation of policy goals to consolidate its success within a context of difficult internal and external economic conditions and a rapidly-changing economic and sociodemographic environment. The country’s immediate policy priority must be to prevent further deterioration in the macroeconomic environment. GDP growth has slowed to just 3.4% in 2015 as energy rationing, high inflation and on-going fiscal consolidation continue to weigh on economic activity.

Longer-term development objectives will also require containing and reducing the vulnerability of those who have, so far, been left behind. This means a continued commitment to expanding access to public services, including health and education, and productive infrastructure, particularly electricity, as well as increasing the quality of these services. Other priorities — highlighted in our study as “win-win policies” — include improving the business climate to allow the Ghanaian private sector and better employment opportunities to flourish, investing in infrastructure and skills development, and increasing connectivity between rural and urban areas. Broadening the coverage of social protection and maximizing their impact through better targeting will help reduce the extreme vulnerability of Ghanaian households to shocks.

The last 25 years have witnessed perhaps the greatest advances in Ghana’s history. Enabling the country’s poorest to break the vicious circle of income inequality and unequal opportunities will be the greatest achievement of a new Ghana, as it continues to set an example of prosperity and stability for the rest of the continent and the world beyond.

Comments

Submitted by Shawn Hayward on

I spent half a year in Ghana and it was an amazing warm friendly and relatively safe place to live. Congratulations Ghana on your accomplishments and may you have more in the future.

Submitted by phinehas musa on

This is what stable democracy,good leadership and a discipline citizenry can do a for a nation not like in Nigeria were corruption and contempt for her people by it's leaders hold sway

Submitted by Clinton Koranteng on

Without a doubt, my country continues to strive for best.I'd probably not have put it in much better context with issues concerning policies set in the country. That probably notwithstanding, congratulations to every Ghanaian in and outside the country for seeking personal development and understanding it's probably the best way of combating poverty

Submitted by Mohammad Baig on

Poverty reduction is proportional to the rate of reducing corruption the only justification which is hardly believable so far in the third world.

Submitted by Roderick Ayeh on

Just as found that the location was key in poverty in the case of Ghana and that poverty is high in the rural areas. Further to these observations is the fact that the number of financial service providers reduces into the rural areas. Accra,Kumasi and some part of the Brong Aharfo regions have high concentration of financial institutions including microfinance companies. Largely these are the areas with high economic activities as well as some level of infrastructure.Further efforts to sustain the achievements in poverty reduction must look at how to encourage a wider spread of financial service providers to create opportunity for the rural poor so they can take advantage of the economic opportunities surrounding them

Submitted by Sam Bediako-Asante on

Indeed,if not the corruption which has taken deep roots in the country as at now, poverty reduction should have been greatly enhanced. Should this menace be reduced, poverty will be minimised.
Agriculture has now been pushed to the background, as a result rural poverty keep on increasing, and leading to rural-urban drift with the resultant urban social menace.
The country's economy is now heavily import driven,which is not good for a developing country.

Taking critical look at these would make Ghana a great place to live.

Submitted by Mentor_Gandhi on

As the Founder to the NGO "Golden_Bridge_Ghana" (GBG) (° 29-02-2004), I am stating since long time that the spirit of entrepreneurship must be encouraged and promoted, so to produce more goods, as Ghana is particularly endowed with a wide range of raw materials, out of what can come qualitative products, going to serve the whole of Ghana's sicio-economy...

Putting across the matter of use of the Ghana COCOA to produce high quality and tasteful chocolate, much better than what actually offered in Ghana; 2 Belgian busisnessmen from Brussels came in 1873 to Ghana to contracting purchase of cocoa, with which the marvellous chocolate brand was created, named "Côte d'Or" (French translation for "Gold Coast") cfr www.cotedor.be
If Ghana can get the know-how from Côte d'Or abd with the own cocoa, here is a fruitful business waiting to be implemented.
Attaching to this perspective, why not creating in Ghana a "Chocolate Museum" and making this issue the real backbone of Ghana!?

Devoted to Ghana,
Mentor Kofi Togbe Gandhi_3000 (Belgium-Ghana),
Belgian national

Contact:
Primary mail inbox: [email protected]
Cell in Belgium: +32479057165

Submitted by awuah honny vera on

I was very impressed about this report I now know so much about Ghana's economic status.

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