New initiatives to address regional disparities in growth

In spite of the country’s challenging fiscal situation (see Economy chapter), Ghana has been one of Africa’s best-performing economies in recent years, having seen significant jumps in both headline growth and capital inflows. Recent oil discoveries, combined with sustained prices for cocoa and gold, led to an influx of capital and boosted activity in a range of sectors, from telecoms to construction. Ghana’s economy is still growing apace – GDP was up 6.7% in the first quarter of 2014 year-on-year and mid-to long-term fundamentals remain very attractive.

The 2007 discovery of oil in the offshore Jubilee field has helped spark a wave of new activity throughout the primary, secondary and tertiary sectors, and – together with a GDP rebasing exercise completed in 2010 – has allowed the country to consolidate its status as a lower middle-income country.

The World Bank estimated the country’s per capita GDP at the start of 2014 at roughly $1850, while overall poverty rates according to the Ghana Statistical Service have fallen from roughly 32% in 2006 to 24% in 2013 – which translates to approximately 600,000 fewer people living below the absolute poverty line of $3.60 a day.

Uneven Development

Nevertheless, in much the same way that London has outperformed Britain’s northern counties in recent years in terms of attracting capital, Ghana – which at 239,460 sq km is only slighter smaller than the UK – grapples with similarly uneven development patterns. The benefits of the West African republic’s recent economic boom have generally been most visible in Accra, which has traditionally accounted for a sizeable portion of GDP and has attracted the bulk of inbound capital.

In the second half of 2013, for example, the Ghana Investment Promotion Centre noted that the capital city received the vast majority of new foreign direct investment (FDI), accounting for about $3bn worth of investments spread across 185 projects. The next largest share of FDI went to the Western Region, the burgeoning centre of the oil industry and home to some of the larger mining operations, at roughly $331m and seven projects, followed by the Ashanti Region, with $287m worth of new investment spread over 14 projects.

The proportion of inbound FDI the three regions receive is perhaps not surprising given that they are home to the bulk of the country’s primary export earners, including gold, cocoa and oil. However, during that same period, the northern swathe of the country – including the Northern Region, the Upper West Region and the Upper East Region – only saw a single project, worth roughly $1m. Poverty remains equally problematic and the three northern regions contribute more than a third to the country’s total impoverished population, although they comprise only around 15% of the overall population.

Up North

This divergent trajectory is not a recent occurrence. Over the past two decades the growth and urbanisation trends Ghana has experienced have had a noticeable impact on poverty alleviation efforts in the south of the country. Population density has increased significantly, particularly in the Ashanti Region and Greater Accra, which together account for more than one-third of the country’s total with 8.5m people, and boast population densities of 194 people per sq km and 1205 people per sq km, respectively. The higher density levels have helped underwrite increases in productivity and demand.

However, northern Ghana, including the Northern Region, along with the Upper West and Upper East Regions, have not historically seen the same results. Northern Ghana’s population of roughly 4m, for example, translated to a density of roughly 35 people per sq km in the Northern Region, 117 people per sq km in the Upper East Region and some 37 people per sq km in the Upper West Region.

Accounting for some 40% of Ghana’s total landmass, the north actually saw an increase in the number of people living under the poverty line from 1994 to 2006 by 900,000, as opposed to a drop of 2.5m in the south. More recently, while the Upper East and Upper West have seen the biggest declines in poverty since 2006, according to the Ghana Statistical Service, they are still among the poorest in absolute terms. The Northern Region continues to be the biggest contributor to national poverty, accounting for roughly one-fifth of the total impoverished population by itself, which is equivalent to just under half of its total population.

In terms of economic activity, the northern half of the country is also dependent predominantly on sectors that are vulnerable to exogenous pressures, including agriculture and forestry. For example, the majority of the economically active population in the Northern Region – above 80% – works in the informal sector, while 68% of working age adults are self-employed, and roughly 22% are unpaid family workers. Underage employment is also higher in the north. Roughly one in three children aged 7-14 in the Upper East Region are actively working.

Redressing The Balance

While population density is also skewed to the south, it does not change the fact that according to the World Bank, the majority of Ghana’s poor live in the north of the country, where non-irrigated agriculture accounts for a large proportion of employment amongst the impoverished population. This has left the region highly vulnerable to cyclical fluctuations.

For a number of reasons, ranging from soil fertility to mineral riches to international transport links, there has been a rapid agglomeration of economic resources in the south of the country over the past two decades, but the north has remained fairly removed from the resulting spill-over effects.

However, there is significant scope for improvement and sizable potential for growth in certain areas, including select crops such as tubers, cereals and livestock. The northern regions already account for more than a third of total national production in those segments, providing a significant comparative advantage. There is also room for improved land utilisation, particularly in the basins of the Volta and Sissili Rivers, as well as the Fumbisi, Katanga, Naboggu and Soo Valleys, where richer arable land and soil are available. As a result the government has sought to try to address this through the implementation of targeted regional development programmes.

The Savannah Accelerated Development Authority, a government initiative launched in 2010, is one such example. With $16m in initial capital, the agency is tasked with spurring greater development and bringing down the poverty rates of northern Ghana to 20% by 2030 from nearly 60% in 2006. The focus of the programme is to boost agricultural output and strengthen exports to neighbouring countries in the Sahel region as well as Côte d’Ivoire and Togo.

One of the efforts unveiled in 2011 as part of this push to reduce the country’s geographic disparity is the “White Gold” campaign, which looks to boost cotton production across three northern zones. Ghana is hoping to emulate some of the success of neighbouring Burkina Faso, where climactic and soil conditions are similar, and which has already successfully developed its cotton industry to account for over half of its export earnings and 8% of GDP.

The White Gold campaign aims to boost Ghana’s cotton production to some 250,000 tonnes in the short term, which would provide employment for 100,000 farmers. In the long term, however, production could rise to as much as five times that figure. Another government initiative has been the Northern Rural Growth Programme (NRGP), a $103m project launched in 2009 by the Ministry of Food and Agriculture with backing from the International Fund for Agricultural Development and the African Development Bank to improve food security, agricultural output and rural development through capital spending and subsidy schemes in the Northern, Upper West and Upper East Regions. Among the programme’s objectives is the rehabilitation of more than 70 feeder roads – stretching over more than 600 km in total – in order to provide all-weather access to crop-producing regions. So far roughly one-quarter of the roads have been redone.

The programme also provides grants for heavy agricultural equipment to farmers, including irrigation pumps and tractors, subsidising the initial cost by as much as 60%. The NRGP has sought to cultivate relationships between farmers and downstream processors to strengthen supply chains and expand the pool of potential buyers, for example by connecting local sorghum farmers with Guinness Ghana.

In recent years, the government has also sought to raise the profile of the northern regions as an investment destination, and in 2012 began hosting the Northern Ghana Investment Forum, an annual conference – the most recent iteration of which came in August 2014 – to help increase investor interest in the area. Work also began in September 2014 on a $100m expansion of the airport in Tamale, the capital of the Northern Region, to allow the city to connect directly with destinations abroad in Burkina Faso, Togo and Côte d’Ivoire.

Regional Effects

Regional disparities in growth have been a regular challenge for countries in West Africa, where many of the larger frontier markets, including Nigeria, Ghana and Côte d’Ivoire struggle with significant geographic, climactic and geologic differences between the more arid north of the countries and the more fertile – as well as urbanised – south. Indeed, resources are unevenly distributed throughout the region as well – Nigeria has most of the oil, while Guinea has bauxite, Ghana gold and Niger uranium. While in many cases such variances would foster trade, West African countries for the most part lack the ability to process raw materials into finished goods or to ship these finished goods to markets, limiting the value brought about by the exchange of raw materials. Other barriers to trade include corruption and non-tariff barriers, such as impromptu road tolls extracted by people who have no authority to do so. A recent study by the World Bank and the IMF concluded that in African countries, each day of transit time en route to a port reduced the value of exports by approximately 7%.

To boost additional trade in the region, Ghana and several other ECOWAS members have committed themselves to a common currency known as the “eco” by 2020 (see analysis). The eco launch date has previously been postponed twice, in 2003 and again in 2009, due to the failure of any member states to meet convergence criteria. The latest news on the subject at the time of writing came in July 2013 when the West African Monetary Agency held a meeting to assess the current state of various deadlines that must be met in the lead up to monetary convergence. At this meeting, the agency urged member states to speed up reforms enhancing tax revenue mobilisation and rationalising public expenditure in order to ensure the implementation of first the eco and then the single to-be-determined currency for all of the ECOWAS bloc.

As for Ghana, there are a sizable spate of projects under way targeting increased development in the north, through initiatives both small – such as subsidising equipment for farmers – and large – such as the Tamale airport expansion. There is a lot of ground to be made up if indicators are to match those of the southern regions, but the north offers a number of comparative advantages that could help to boost headline growth in the years to come.

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This article is from the Country Profile chapter of The Report: Ghana 2014. Explore other chapters from this report.