Ghana has its own stock exchange. True, it only trades shares in 30 companies and is only open for three hours a day, but you have to start somewhere. As the trade minister, Alan Kyerematen, puts it: ”This is the Wall Street of Ghana. Wall Street used to be like this once.”
What the minister says is absolutely correct. Wall Street was named after the barricade that kept the cows in and the Indians out. As in London, the first steps towards today’s financial market in New York were taken when merchants gathered in a coffee house.
Africa will only cease to be the world’s poorest continent when it boasts a thriving commercial sector; the lesson from history is that countries cannot make the transition from subsistence to industrial economies without access to large quantities of capital.
Ghana is further down the development road than many other nations in sub-Saharan Africa. All four countries I visited last week have barriers to climb but Ghana has the fewest. It has a more stable political system than Nigeria; a more diversified economy than Mali; a bigger middle-class than Tanzania. It benefits from debt relief but realises that this on its own will not be enough. Kyerematen is realistic about the challenge. Ghana — and by extension, Africa as a whole — has problems at all levels: at company, national, regional and a global level.
In terms of human development, a country such as Mali is where Britain was 250 years ago. It has an abundance of a primary commodity — cotton — but has yet to find a way of moving up the value-added chain by turning the raw material into finished goods. There is a lack of clean water and electricity; the road system is rudimentary; four-fifths of the population are illiterate; more than a fifth of children do not survive until the age of five.
Theoretically, the transition to an industrial society should be easier than it was in the 18th century, because there is a template to work from. We know what is needed: a system of property rights, the rule of law, the absence of conflict, access to financial, technological and management know-how and basic skills. And there are some hopeful signs. Mobile telephony is taking off in a big way in Africa; there are booths in even the poorest parts of Accra selling phone cards. The lack of investment in a terrestrial network is proving something of a blessing in disguise — Africa is skipping a generation. Similarly, we know what causes malaria, tuberculosis and dysentery.
Growth
So why, then, is Africa not doing better? In one sense this is the wrong question, since recent performance has been reasonably good. Tanzania’s growth rate has averaged almost 7% since 2001, for example; Mozambique has done even better than that. The fact is, of course, that these countries start from a low base; they have large numbers of people unemployed or working in the informal economy; the formal economy is inchoate. Sub-Saharan Africa as a whole is enjoying its best period of sustained economic growth in three decades.
This needs to be put into context, though. A good chunk of the extra growth is the result of higher commodity prices, and these tend to have the effect of pushing up the real exchange rate, hence making life more difficult for exports of industrial goods. If the long-term aim is to diversify out of commodities and into manufacturing and services — which is what it should be — high commodity prices can be a curse. In South Africa, for instance, the appreciation of the rand, on the back of the soaring gold price, is not good news for the poor.
Ultimately, we come back to Kyerematen’s four challenges. At the level of the firm, productivity tends to be weak because of a lack of investment in both physical and human capital. In countries such as Ghana, there is evidence of micro-financing initiatives to provide seed-corn capital for individual traders, but it is still early days. At the second level, governments need to think strategically about what their priorities are. The drive for universal primary education is welcome but there has been no similar expansion of secondary, let along tertiary, education. The regional challenge is pretty straightforward. Africa needs three or four powerhouses — one in each part of the continent — to drag the rest along. South Africa, Nigeria and Kenya are the potential hubs for regional markets in which countries can exploit economies of scale and the potential to trade. Trade barriers within Africa are as serious an impediment to development as are unfair global trade rules.
That said, there is little doubt that the continent has been ill served by the international system. The policies foisted on indebted countries by the IMF and the World Bank — liberalising imports, for example — have often been precisely the opposite of what is needed to build up a manufacturing base. Ghana used to can its own tomatoes locally but the market has now been flooded with Italian and Chinese imports. Meanwhile, the European Union will take Ghana’s cocoa beans but not its chocolate.
Rhetoric
This, then, is the challenge and it is a big one. The West has a role to play. In Accra, there are 15 blocks of latrines in the poor district of Nima bought with the proceeds of debt relief. Promises have been made about the level of investment the G8 intends to make in Africa and these should be kept. Understandably, there is a nervousness in Ghana about the outcome of the WTO talks. These, remember, were originally billed as a ”development round”, although there has been precious little evidence that the rhetoric has been translated into action. To fulfil the bargain, there needs to be a generous package of special assistance to help poor countries develop their export industries, a moratorium on forced liberalisation and strict limits on the product lines that the West can continue to protect.
In the end, however, debt relief, aid and trade are only a part of the solution — and perhaps only a small part at that. It is patronising to assume that the West can sort out all of Africa’s problems. It can’t. There is a generation of leaders emerging in countries such as Ghana, Mozambique and Tanzania who know what needs to happen. They should be given a fair wind and left to get on with it. – Guardian Unlimited Â