Ghana has the potential to kick-start Africa’s journey to economic stability. Just like the U.K. was the forerunner for Europe and Japan for East Asia. Compared to other African countries, Ghana enjoys the advantages of geography, institutions and human capital. Situated on the coast, its various ports have been an asset to international trade. Furthermore, there is less ethnic fragmentation as members of the Akan ethnic group make up about half of the population. It scores well on international indicators of governance quality, freedom, democracy, ease of doing business, literacy rates and corruption. Even its relatively lower child mortality indicates a healthy populace.
These advantages have helped to make Ghana one of the fastest-growing countries on the continent. However, to lead economic development in West Africa, structural transformation comes first. Ghana specializes in commodities and although it is not detrimental to the country’s future, the country needs strong policies to achieve economic progress.
Ghana has a significant dependence on the commodities and the agricultural sector. Consumption cities where the economies consist primarily of non-tradable services are the targets for urbanisation. However, the service sector with its unsettling employment situations is not the best for the Ghanaian economy.
The industrialization has proved to be a much more reliable path to national wealth. Manufacturing is less susceptible to dynamic global price movements than commodities, resulting in a more diversified economy and facilitating learning and rapid productivity growth. However, the presence of natural resources in the country has hindered its interest in manufacturing. According to Bloomberg, strong commodity exports raise the value of a country’s exchange rate, making manufactured exports more expensive. They also make wages in the industrial sector noncompetitive.
This helps explain why Ghana’s commendable manufacturing efforts to are unfruitful. For example, Ghana established export-oriented special economic zones similar to those of China which turned out to specialize in commodities instead.
Nevertheless, Ghana must not relent in its struggle for economic stability. Providing subsidies to manufactured exports is a great place to start. Substantial and durable subsidies on wages and cost for export-oriented manufacturing could restore comparative advantage. The Ghanaian government could also provide cheaper and more sustainable power sources for export-oriented factories. This could help attract foreign investors and encourage domestic entrepreneurs. To add value to its human capital, the country could source for skilled immigrants, especially from nearby Nigeria or the African diaspora.
Ghana has the raw material, entrepreneurial and innovative talent, to lead industrialisation in West Africa. China and other industrialized nations are interested in Ghana as a production base for the burgeoning West African market. To achieve this, the Ghanian leadership must aspire towards more than a commodity-driven economy and urbanization.