Economy slips to 14th in Africa

Ghana has been ranked 111th most competitive economy in the world in the 2015 World Economic Forum’s Global Competitiveness Index (GCI) report.

This places the Ghanaian economy 14th in Africa.The report, which assesses 144 countries including 38 African countries, placed Ghana behind Mauritius, South Africa, Rwanda, Morocco, Botswana, Algeria, Tunisia, Namibia, Kenya, Seychelles, Zambia, Gabon and Lesotho.

The report assesses the economies based on 12 key pillars: namely institutions, infrastructure, macroeconomic environment, health and primary education, higher education, goods market efficiency, labour market efficiency, financial market, technological readiness, and market size.

The 12 key pillars are further categorised under three sub-indexes: namely basic requirements, efficiency enhancers, and innovation and sophistication factors.

The basic requirements as per the report include: institutions, infrastructure, macroeconomic environment, and health and primary education.

The efficiency enhancers also include: higher education, goods market efficiency, labour maket efficiency, technological readiness, and market size.

The third sub-index — innovation and sophistication factors — include: business sophistication and innovation.

A critical scrutiny at the report shows Ghana performed unsatisfactorily under the basic requirement category.

With a barometer of 7, the economy scored 3.9 in institutions, 3 in infrastructure, 3.4 in macroeconomic environment, and 4.5 in health and primary education.

According to the report, the quality of institutions has actually been deteriorating in both OECD and African economies according to the GCI.

This, the report says, might explain in part why Africa’s competitiveness seems to have stagnated in comparison to OECD economies.

“In Africa, a decline of security and government efficiency — two components of the public institutions sub-pillar — would appear to be at the core of this decline. Sound public institutions and governance are an important prerequisite for economic development; against this backdrop, their weakening — as indicated by the data — raises questions about whether the fundamentals are in a position that will put growth on a sustainable footing,” states the report.

This suggests that more effort should be made to increase the capacity of institutional frameworks, as they provide a critical foundation for the other dimensions of competitiveness.

Commenting on infrastructure, which recorded the least growth in this category, the report cited “unreliable electricity supply” as the major bottleneck hampering the continent’s transition to higher-value-added activities, adding that Africa — based on a sample of 48 economies — generates roughly the same power as Spain, although Africa’s population is nearing 1.1 billion while there are only 49 million people in Spain.

Clearly, Ghana is not left out of this serious challenge, as the country is experiencing power shortfalls like never before.

The country currently sheds between 400-600MW of power daily, which has been blamed for low productivity and job-losses.

In the area of macroeconomic stability, Ghana scored 3.4 — reflecting the country’s poor macroeconomic stability.

Current inflation rate stands at 17.4 percent against the end of the year target of 13.7 percent.

The GDP growth rate initially slated at 3.9 percent was revised to 3.5 percent after the start of a three-year IMF budgetary support programme.

The monetary policy rate was recently increased by 100 percentage points to 26 percent. The local currency is also unstable against the major trading currencies, notably the dollar.

Overall, Ghana was ranked 123 and scored 3.68 in the basic requirements sub-index.

On the efficiency enhancers sub-index, Ghana ranked 89 and scored 3.78; and was ranked 68 in innovation and sophistication factors with a mark of 3.62, all culminating in 111th on the GCI.

The report recommends that for Africa as a whole to climb on the GCI, quality of education must be increased as it is essential to raising productivity across all sectors.

Reducing barriers of trade is another recommendation made by the report.

The report states: “The reduction of barriers remains a critical component for increasing Africa’s competitiveness. Beyond the poor quality of physical infrastructure and high tariffs, estimates show that 60 to 90 percent of trade costs relate to non-tariff measures.”

Another recommendation is that governments must develop and improve transport and ICT infrastructure, since unreliable energy, an ineffective urban-rural road network, and inefficient ports are the main impediments to better performance of the agriculture sector.