Western Africa represents one of the largest undeveloped markets left in the world. While the rest of the continent endures ongoing turmoil and violence, Ghana specifically has maintained a stable democracy that has now seen five consecutive successful elections. Now, Ghana is pushing to fully capitalize on this state of peace and relative economic prosperity by courting American private sector businesses.
Blazing this trail of sudden growth, Ghana will determine within the next few years the direction of their future development. As one of the first grantees of a Millennium Challenge Corporation compact in 2004 awarded at $500 million, it is now negotiating a second five-year compact, which it hopes to utilize in a way that will evenly distribute the development evenly across the entire country, instead of in the select regions targeted in the first compact. In addition, Ghana has discovered oil reserves that are expected to raise its economic growth average from the 5% seen in 2010 to an astounding 9% in 2011. But the real difference, according to Minister of Trade and Industry H.E. Hanna S. Tetteh, will be in private sector investments.
“The ultimate objective right now is to create competitive exports,” she said at a National Press Club meeting on February 24. The African Growth and Opportunity Act (AGOA) created in 2000 was successful at increasing European access to African markets, as 45% of Ghana’s exports now go to the EU. However, Tetteh laments the act’s inability to fully encourage American businesses. Now, with the country’s infrastructure dramatically improving by way of MCC funds, Tetteh says Ghana is poised to become a new epicenter of American investments in Africa. But at what cost? And will these private-sector investments really benefit Ghana economically in the long-term?
Tetteh says yes. “In addition to investing in sovereign oil funds, we will use the revenue for infrastructure, agribusiness and other platforms for further economic growth, such as education. What we’ve found is that improving public institutions creates stability, irrespective of politics.” She later went on to explain, “We have two requirements for private sector investment in Ghana: one, it must create new economic opportunities. Two, these opportunities have to be available to Ghanaians.”
How easily these requirements can be enforced has yet to be seen, but Tetteh says that based on the successes from the first MCC compact, there is much reason to remain optimistic: “We’ve seen that there’s been a lot of strong relationships developed that involved a lot of trust and respect. These businesses have remained invested in Ghana even after their contracts expire, which is a great sign for things to come.”
Neither trust nor respect have been historically prevalent in the oil and gas industry, and have been most notably lacking in Africa. Whether or not they can be fostered in an African country that is politically stable entering the development process will be the big question as these investors begin to stake their claims in the region.
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Ghana in Transition
February 28, 2011
Western Africa represents one of the largest undeveloped markets left in the world. While the rest of the continent endures ongoing turmoil and violence, Ghana specifically has maintained a stable democracy that has now seen five consecutive successful elections. Now, Ghana is pushing to fully capitalize on this state of peace and relative economic prosperity by courting American private sector businesses.
Blazing this trail of sudden growth, Ghana will determine within the next few years the direction of their future development. As one of the first grantees of a Millennium Challenge Corporation compact in 2004 awarded at $500 million, it is now negotiating a second five-year compact, which it hopes to utilize in a way that will evenly distribute the development evenly across the entire country, instead of in the select regions targeted in the first compact. In addition, Ghana has discovered oil reserves that are expected to raise its economic growth average from the 5% seen in 2010 to an astounding 9% in 2011. But the real difference, according to Minister of Trade and Industry H.E. Hanna S. Tetteh, will be in private sector investments.
“The ultimate objective right now is to create competitive exports,” she said at a National Press Club meeting on February 24. The African Growth and Opportunity Act (AGOA) created in 2000 was successful at increasing European access to African markets, as 45% of Ghana’s exports now go to the EU. However, Tetteh laments the act’s inability to fully encourage American businesses. Now, with the country’s infrastructure dramatically improving by way of MCC funds, Tetteh says Ghana is poised to become a new epicenter of American investments in Africa. But at what cost? And will these private-sector investments really benefit Ghana economically in the long-term?
Tetteh says yes. “In addition to investing in sovereign oil funds, we will use the revenue for infrastructure, agribusiness and other platforms for further economic growth, such as education. What we’ve found is that improving public institutions creates stability, irrespective of politics.” She later went on to explain, “We have two requirements for private sector investment in Ghana: one, it must create new economic opportunities. Two, these opportunities have to be available to Ghanaians.”
How easily these requirements can be enforced has yet to be seen, but Tetteh says that based on the successes from the first MCC compact, there is much reason to remain optimistic: “We’ve seen that there’s been a lot of strong relationships developed that involved a lot of trust and respect. These businesses have remained invested in Ghana even after their contracts expire, which is a great sign for things to come.”
Neither trust nor respect have been historically prevalent in the oil and gas industry, and have been most notably lacking in Africa. Whether or not they can be fostered in an African country that is politically stable entering the development process will be the big question as these investors begin to stake their claims in the region.
