The Myth Behind the Economic Growth in Ghana and Mozambique
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Par Anton_Ivanov/Shutterstock.com
Paula Dias Carneiro
(FR) Nombreux sont ceux qui considèrent le Niger et l’Afrique du Sud comme étant les seuls pays du continent africain dotés d’une puissance économique. Pourtant, ce n’est pas le cas. Le Ghana et le Mozambique sont deux exemples d’économies émergentes qui les caractérisent aujourd’hui comme de réels atouts de l’industriel international. Le début de leur croissance économique date d’il y a déjà plusieurs décennies. Néanmoins, malgré leurs efforts de développement économique, ces pays restent confrontés à un nombre de problèmes macroéconomiques, notamment des taux de chômage élevés ainsi qu’un manque d’éducation. Cet article traitera de l’historique de croissance économique de ces deux pays et examinera les stratégies pouvant permettre une répartition des richesses au sein de la population afin qu’ils puissent prospérer à long terme.
According to GDP per capita, Africa is the poorest continent. Nevertheless, there are several countries planning on overcoming this economic dilemma. Ghana and Mozambique have rising economies that have since placed them on the international industrial map. Their journey toward economic growth began decades ago. Ghana was pushed to follow Social Adjustment Programs (SAPs) in the mid-eighties, while Mozambique faced an ongoing civil war before making economic reforms in the nineties (Bhorat and Tarp 2016, 77-150). In order for an economy to improve, macroeconomic policies must first ameliorate to ensure that economic growth remains fixed and sustainable.
Despite both Ghana and Mozambique trying to improve their economies, there are prevalent problems in their macroeconomic sector, such as high unemployment rates and lack of education. A high standard of living is a major indicator of economic growth, however, both of these countries’ populations remain consistently poor (Leys 1982, 102). In essence, the economies in Ghana and Mozambique may be growing on paper, but these countries are failing to implement this growth among the population. It is through these nations’ reliance on primary products and their lack of investment manufacture, that their employment and education rates lag behind their economic growth.
Ghana’s economic growth has lost its way by failing to create new forms of employment and in implementing higher levels of education. Before analyzing the difficulty to improve the quality of life for Ghanaians, the country’s economic journey must be explained. Prior to its economic rise in the eighties, Ghana followed a state-run economic system of management (Huq and Tribe 2018, 3). This meant that the government was closely tied to all activities related to its economy in order to reach a developed state. However, this post-independence method did not achieve the form of development that the government had anticipated, and ultimately failed. It was not until the mid-eighties that the economy started improving due to international organizations such as the World Bank and the International Monetary Fund, forcing a SAP onto Ghana (Huq and Tribe 2016, 3).
A SAP is a custom program that a given country must follow in order to stabilize and improve their economy. In this case, Ghana had to take “radical foreign exchange reforms based on a further devaluation of the cedi” (Huq and Tribe 2016, 3). Unlike many developing countries, Ghana was able to follow such a program and create an economy that has since grown, due to its new neoliberal strategies (Huq and Tribe 2016, 4-5). Despite the progress of the newly adapted neoliberal approaches, such as handing over economic divisions to the private sector as opposed to the government, Ghana continues to have development problems. Researchers are critical of the neoliberal ideals that Ghana adopted throughout the decade, stating that the economy is translating into a “paradox of growth without development” (Ayelazuno 2014, 81). In essence, this was the start of an economic growth formula that did not have the population in the equation.
Ghana's economy relies heavily on primary commodities such as gold, cocoa, and oil (Bhorat and Tarp 2016, 79-80). In 2013, the Bank of Ghana suggested that Ghana’s primary products accounted for eighty percent of their total exports (Bhorat and Tarp 2016, 79-80). Although oil production had only begun in 2010, it has since surged from 29.5 percent in 2010, to 48.1 percent in 2012 (Bhorat and Tarp 2016, 79-80). However, oil production has only been added to the nation’s list of primary commodities, rather than the nation promoting an alternative product that could help in their manufacturing industry. This is where we see the myth regarding economic growth emerge: as the population suffers from weak employment responses, with their overall standard of living remaining low, levels of education are down and skills are not acquired in the workforce, contrary to the evident economic growth in the country. Although the production of oil helped Ghana gain a new industrial sector in national output, the decline in manufacturing industries negatively affects the economic transformation effort (Bhorat and Tarp 2016, 77).
If we consider the stages of growth as suggested by Walt W. Rostow, Ghana seems to be stuck in the take-off stage: the country is at a stage in economic growth where they are solely focused on their new industry of oil (Rostow 1959, 8). There is a clear struggle to reach the next stage: the drive to maturity where standards of living and technology rise (Rostow 1959, 8). This struggle is caused by the nation’s reliance on their primary commodities, rather than on creating new commercial industries that would help produce new forms of employment and improve income. A shift from reliance on primary products to manufacturing would allow Ghanaians the structural change needed to achieve higher-valued job sectors, as well as an upgrade in technology (Bhorat and Tarp 2016, 78). Ghana’s reliance on primary products hurts the basis for a “structural economic transformation,” as jobs in such sectors do not need much education at all (Bhorat and Tarp 2016, 78). The key ingredient to this ideal workforce is acquiring more skilled and knowledgeable workers, which cannot be achieved without higher levels of education.
In 2013, Ghana’s employment lagged behind economic growth; with every 1 percent annual increase in economic growth, there was only a 0.47 percent increase in the employment growth rate (Bhorat and Tarp 2016, 78). Furthermore, research conducted in 2010 revealed that seven out of ten jobs were estimated to be “vulnerable,” in addition to their low incomes and unpredictable working conditions (Bhorat and Tarp 2016, 78). If we return to the features of a growing economy, the standard of living is among many that are known to reflect a sudden growth. However, Ghana’s standard of living continues to diminish regardless of their economy, as there is no redirection towards manufacturing. The focus on increasing primary production rather than on improving employment and education rates through new manufacturing technology, has hindered the country’s ability to support a sustained economy.
Mozambique’s economy has continued to rise since the end of the civil war. However, the improvement of the country’s poverty has stagnated, and productivity rates remain low. Prior to Mozambique’s present moment of continuous growth, Mozambique had a series of fluctuating economic phases. As a former Portuguese settler colony, their primary form of production was cash crops such as tea and cotton. However, with its ideal location, Mozambique has always been an ideal country to invest towards industrial ports. For instance, Mozambique contains many major ports and hubs for trade into other southern African countries such as South Africa and Zimbabwe (Bhorat and Tarp 2016, 148). Their economy was at its peak, as foreign investments skyrocketed and migrants flooded the country during the post-WWII period (Bhorat and Tarp 2016, 148). However, the country’s economy later declined drastically while it sought independence. The newly formed government faced the challenge of an extreme divide between the colonists and the Mozambican population. This divide reached such an extreme point that it triggered a mass exodus of the settlers, as well as the burning of most of their businesses (Bhorat and Tarp 2016, 149). These violent actions continue to impact Mozambique’s economy, as most of the jobs during this time “had been dominated by these settlers, [making] skill shortages immediate and acute” (Bhorat and Tarp 2016, 149). Mozambique fared even worse when Cold War tensions unleashed a 15-year civil war that killed more than one million people. The country also suffered from food shortages, causing it to be deemed as having “one of the lowest levels of per capita caloric availability in the world” (Bhorat and Tarp 2016, 149).
As long as the war persisted, Mozambique did not have the resources or time to focus on their economy. Once the war ended, the country sought to create a plan in order to improve their jeopardized economy. Just as with Ghana, Mozambique used the help of the International Monetary Fund and World Bank to create a plan that would allow Mozambique to revive their previously healthy economy. This SAP allowed for controlled inflation, the reduction of deficits, and expanded government spending (Bhorat and Tarp 2016, 151). It is important to note that, although these inflows of foreign aid remain important for Mozambique, the country was not dependent on these funds. As a result, Mozambique was able to make a profit and extend their industrial sphere independently from most international foreign aid “due to a combination of the mechanical impact of sustained GDP growth, domestic revenue growth, and inflows of alternative sources of external finance, such as foreign direct investment and international capital investment” (Bhorat and Tarp 2016, 151). It must also be noted that government control over the economy has since been scaled back and has also transferred into a neoliberal system (Dibben 2010, 468). The privatization of state enterprises and removal of price controls were further steps taken by the country in order to complete the SAPs (Bhorat and Tarp 2016, 151). Additionally, the Mozambican economy mostly consists of natural resources that have found their way into foreign investors.
Ghana and Mozambique have both created a system to develop primary commodities, with their focus on attracting foreign investments (Bhorat and Tarp 2016, 152). The commodities in question are natural gas fields, thermal and cooking coal, and several other mineral sectors. Although the Mozambican economy has been growing at an annual average of 7.5 percent, it remains both inefficient and ineffective at creating new employment and reducing poverty (Castel-Branco 2014, 26). Researchers find that the country’s labour system creates a workforce that is paid far below its social costs for survival (Castel-Branco 2014, 26). Mozambique’s workforce remains reliant on low-productivity agricultural activities, a sector that is lacking in signs of the efficient transformation that would provide future growth and economic reform (Bhorat and Tarp 2016, 146).
An important characteristic of economic growth is structural transformation in which there is a shift from low work productivity to higher productivity rates, as well as less endangered employment. Existing statistics from a range of middle- and high-income countries demonstrate a positive relationship between economic growth and the rate of employment, as well as labour productivity (Bhorat and Tarp 2016, 151). Although there are clear differences between the types of industrial enterprises in these countries compared to Mozambique, we can still look at the agricultural sector. This same economic growth also demonstrates an increase in productivity within the agricultural sector. As such, the lack of Mozambican structural transformation should be worrisome (Bhorat and Tarp 2016, 151). In short, structural change has not yet been achieved in the recent decades of economic growth experienced by the country, and their largest employment sector has not reached a status of productivity, hence the population’s lack of income and extreme poverty. Through considering previous research from other countries experiencing a rise in the economy, it becomes clear that structural change in important sectors creates productivity. Ultimately, Mozambique has seen the opposite effect in a rising economy: poverty reduction has weakened due to low productivity as well as a lack of work reforms.
Mozambique and Ghana both have thriving economies within the poorest continent in the world. Although their GDPs have been quickly rising, they lack the maturity of sustainability. For instance, both countries face problems such as rising poverty, unemployment, and low levels of education. Such absences of structural transformation have been popular within Sub-Saharan Africa. However, with improved macroeconomic reforms, there is hope for a higher standard of living. Through the help of foreign aid, both Ghana and Mozambique were able to overcome their struggling economies. Ghana continues to rely on primary commodities, such as cocoa and oil, rather than on investing in manufacturing. Not only would such an investment help with creating new employment, but it would introduce new technology into the country. Education levels would rise with new employment, allowing the population to experience a thriving economy and a better standard of living. Mozambique fails in the efficiency of their agricultural sector as they also rely mostly on primary commodities–an inefficient strain that forces poverty onto the population as the economy rises. In conclusion, both countries have the potential to improve their economic growth, but it will be difficult to see continuous economic growth without Ghanaians and Mozambicans moving away from primary commodities and investing into new manufacturing goods.