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Ghana

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Development potential
Foreign policy
Priority areas of German cooperation with Ghana
Agriculture and food security
Decentralisation
Sustainable economic development
Debt relief

Situation and Cooperation

People on the street in Ghana. Copyright: bpaGhana has gone through an exem­plary democrati­sa­tion process in recent years and successfully imple­mented economic reforms. In order to provide further support for these positive develop­ments, many donors are extensively involved in Ghana. However, this means Ghana is highly dependent on donor funding, which accounts for at least one third of the national budget.

Poverty reduction and the promotion of economic growth are the government’s main objectives. Since 2003, government policy has been based on a national Poverty Reduction Strategy Paper (PRSP). In November 2005 the government adopted a follow-up paper: the Ghanaian Growth and Poverty Reduction Strategy II (GPRS II). The strategy’s guiding vision is broad-scale growth based on agriculture. Modernisation of agriculture and improve­ments to infrastructure, social services and workforce skills will all contribute to reducing poverty in Ghana. In addition, government performance is to be enhanced (good governance) and the private sector promoted. The successor document, the Ghana Shared Growth and Development Agenda (GSGDA), to be implemented over the period 2010–2013, also attaches particular importance to equitable, pro-poor distribution of the benefits of economic growth.

Ghana’s economy benefits from high world market prices for cocoa and gold. Ghana is one of the largest gold producers in the world, generating more than one third of its total export earnings from gold, followed by cocoa and high-grade timber.

Agriculture is pivotal for Ghana. More than half the working population is active in this sector. However, agricultural productivity remains very low. Almost half of Ghana’s economic output is contributed by the informal sector.

To a certain extent, foreigners are still wary of investing in the country owing to the bureaucratic obstacles involved and to uncertainty about the enforcement of legal claims. A poor communications infrastructure and skills deficiencies in the workforce also inhibit foreign investment. Around 35 per cent of adults in Ghana cannot read or write.

The government is endeavouring to improve conditions for investors. It has created the Ghana Investment Promotion Centre as an initial point of contact for investors. In addition, Ghana is planning numerous infrastructure projects. In the World Bank report "Doing Business 2010", which measures the investment climate in 183 countries, Ghana has steadily improved its ranking in recent years. The country now ranks 92nd in the world and 7th among the sub-Saharan African countries.

However, not all Ghana’s people are benefiting from the positive economic developments. More than half the population lives on the equivalent of less than two US dollars a day. According to the Human Development Index (HDI) for 2009, Ghana ranks 152nd out of 182 countries.

The population is growing by around two per cent a year. This high growth rate has resulted in intensive use of arable land. Slash-and-burn cultivation and illegal logging threaten forest stocks. The World Wide Fund for Nature (WWF) estimates that up to 60 per cent of logging is illegal. As part of its response to this problem, Ghana signed an agreement with the EU on the export of sustainable timber and wood products in February 2010. The environment is also suffering from the adverse effects of mining and industrial activities.

Water supply is also a problem in Ghana. Only 80 per cent of the population has guaranteed access to clean drinking water.

Development potential

Ghana’s mining sector is experiencing an upturn as production is boosted in response to high gold prices and new investment. The sector is dominated, however, by international corporations. Since 2003, Ghana has been a member of the Extractive Industries Transparency Initiative (EITI) launched in Johannes­burg in 2002.

Oil and gas production is also an important growth market. In 2007, major oil deposits were discovered in the Gulf of Guinea off the Ghanaian coast. Commercial production is scheduled to begin in late 2010/early 2011. Ghana’s new government has given repeated assurances that it will abide by high standards of transparency in its cooperation with oil companies and will use the revenue for the country’s sustainable development and poverty reduction. At present, however, there is no sign of any unified legislation for the oil industry being adopted.

Alongside mining, other sectors of the economy capable of contributing to Ghana's future development are agriculture, fishing, forestry and the use of hydropower. Tourism is also developing in a promising way. Nevertheless, a key precondition for positive development in these sectors is the sustainable use of natural resources.

Civil society in Ghana is making increasing use of its freedoms, and thus helping to further democratise the country. Political conditions are now stable. The poverty reduction strategy enjoys popular support. The government of John Atta Mills, in office since January 2009, launched a public debate about its strategy on cooperation with international donors during its first year in office and thus facilitated the active involvement of citizens.

Ghana has ample well-qualified human resources, including at the managerial level, and the country is continuing its efforts to foster a healthy investment climate. If it succeeds in generating greater legal security for investors, many wealthy expatriate Ghanaians may well return home and invest in their country’s economy.

Foreign policy

For many years now Ghana has successfully pursued a policy of good neighbourliness and is committed to regional cooperation. The country is one of the most active members of the African Union (AU). From the start of 2007 until January 2008 Ghana held the presidency of the African Union. Within the Economic Commu­nity of West African States (ECOWAS), Ghana promotes intensive cooperation in the region, and it supports the New Partnership for Africa’s Development (NEPAD). Ghana was the first African country to successfully complete the NEPAD African Peer Review Mechanism (APRM). The APRM is a voluntary system aimed at monitoring governance in African countries.

Ghana is committed to the peaceful resolution of conflicts in the region; in summer 2003, for example, it played a successful mediation role in the Liberian civil war.

In December 2007 Ghana signed an interim agreement with the European Union in the context of the planned Economic Partner­ship Agreements (EPAs) with the ACP states. This grants Ghanaian exports continued unhindered access to European markets and liberalises market access for some European products in Ghana. Ghana sees the EU as a role model for the Economic Community of West African States (ECOWAS).

Priority areas of German cooperation with Ghana

Alongside the United Kingdom, the USA, Denmark, Canada and the Netherlands, Germany is one of Ghana’s most important donors.

On 1 March 2007, all 16 OECD/DAC donors active in Ghana signed the Ghana Joint Assistance Strategy (G-JAS), which forms the framework for supporting the Ghanaian Growth and Poverty Reduction Strategy II and the APRM action plan. The Ghana Joint Assistance Strategy runs for a four-year term (2007-2010).

The Federal Ministry for Economic Cooperation and Development (BMZ) has pledged a total of 130 million euros to Ghana for the years 2009–2011. This represents an increase of more than 60 per cent, rising from the previous 26.5 million euros to 43.33 million euros per year, and reflects the German government’s goal of granting particular support to partner countries with good governance.

The governments of Ghana and Germany have agreed on the following priority areas of cooperation which are aligned with the Ghanaian PRSP and are intended to promote the achievement of the Millennium Development Goals:

  • Agriculture and food security

  • Decentralisation

  • Sustainable economic development

Agriculture and food security

Baobab tree in northern Ghana. Copyright: GTZ GhanaTo combat poverty in Ghana and establish food security, Germany is engaged in activities designed to increase agri­cultural producti­vity. At present, agriculture’s potential is under-exploited; technical, institutional and economic policy short­comings make agricultural value added very low in Ghana. Small farmers in particular have difficulty marketing their products.

The aim of German involvement in this priority area is to enable farmers to raise their production beyond the level of subsistence farming and generate an income. To this end, extension services are being made available to farmers in order to improve the production and marketing of their products.

Furthermore, the rural infrastructure is being expanded. Support is also provided for the integration of production chains, i.e. better coordination of the work of farmers, traders and processing firms.

Long-term purchase agreements between small farmers and traders in primary products mean that the farmers receive a guaranteed income and are able to plan and invest over the long term.

Decentralisation

Decentralisation is one of the key targets specified by Ghana in its PRSP. The country’s government is firmly committed to establishing democratic structures and improving governance. By establishing national, regional and local-level administrative structures, it is endeavouring to lay the foundations for sustainable economic growth.

German development cooperation promotes Ghana’s efforts in this context, focusing primarily on the following aspects: supporting PRSP implementation, poverty-oriented decentrali­sa­tion and local development, improving legal security by means of legal reforms, e.g. through support for the land authority, promoting civil society and enhancing the performance capacity of administrative bodies. A number of political foundations are making an important contribution in this connection in Ghana. The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), various non-governmental organisations (NGOs) and churches are also promoting demo­cratisation and the strengthening of Ghanaian civil society.

Sustainable economic development

Both the government of Ghana and the international donor community have high hopes of the private sector. A government programme aimed at making the private sector the driver of economic growth bears the promising name "Golden Age of Business". For such a golden age of economic prosperity to come about, Ghana first has to put in place framework conditions that will encourage the private sector to invest considerably more than it has done so far.

For this reason, German development cooperation with Ghana fosters the development of markets, products and services. It aims to help eliminate structural weaknesses and to build capacity to support the development of micro, small and medium-sized enterprises (MSMEs). This work takes place in close cooperation with business associations, ministries and district administrations. Improved access to financial services – e.g. in the form of micro-loans – is another priority of cooperation.

Companies are to be made more competitive, albeit in keeping with core labour standards, thus enabling them to provide jobs and income. A large number of German organisations are working in Ghana towards this end. The aim is, through Technical Cooperation and by seconding experts, to promote the private sector and help develop sales markets. Authorities responsible for the private sector are receiving advice and support, as are non-governmental organisations operating in the private-sector sphere.

Debt relief

Ghana used to be one of the most highly indebted countries in Africa. It submitted an interim PRSP in 2000, before reaching the decision point under the HIPC II Initiative in February 2002. One year later, in February 2003, it submitted its full PRSP. Ghana reached the completion point in July 2004.

On reaching completion point Ghana also qualified for the Multilateral Debt Relief Initiative (MDRI) as agreed by the G8 in Gleneagles in June 2005. All Ghana’s debts to the International Monetary Fund (IMF), the World Bank’s International Develop­ment Association (IDA) and the African Development Fund (AfDF) are waived. Total debt cancellation for Ghana in the context of both debt relief initiatives amounted to 7.4 billion US dollars. Germany has cancelled all Ghana’s debts, which amounted to approximately 494 million euros.

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