BTI 2016 | Ghana Country Report

Status Index

1-10

6.88

# 30 of 129

Political Transformation

1-10

7.90

# 20 of 129



Economic Transformation

1-10

5.86

# 57 of 129

Management Index

1-10

6.41

# 20 of 129

scale

score

rank

trend

This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI)
2016. It covers the period from 1 February 2013 to 31 January 2015. The BTI
assesses the transformation toward democracy and a market economy as wellas the quality of political management in 129 countries. More on the BTI at
http://www.bti-project.org.
Please cite as follows: Bertelsmann Stiftung, BTI 2016 — Ghana Country
Report. Gütersloh: Bertelsmann Stiftung, 2016.
This work is licensed under a Creative Commons Attribution 4.0 International
License.

BTI 2016 | Ghana

2

Key Indicators
Population

M

26.8

HDI

Pop. growth1% p.a.

2.4

HDI rank of 187

Life expectancy

years

61.1
53.4

Urban population %0.573

GDP p.c., PPP $4089.8138

Gini Index

UN Education Index

0.553

Poverty3%

49.0

Gender inequality2

0.549

Aid per capita $

50.9

42.8

Sources (as of October 2015): The World Bank, World Development Indicators 2015 | UNDP, Human Development
Report 2014. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of
population living on less than $3.10 a day at 2011 international prices.

Executive Summary
During the period under review, political and economic development in Ghana has been
problematic in some areas, especially in regard to the economy. Fiscal indiscipline and the failure
to tackle an increasingly high inflation rate have put great strain on the Ghanaian economy.
Though the economy still grew, its progress has been disappointing and the adverse effects of everhigher indebtedness (currently 60% of the GDP) and galloping prices have been felt in daily life.
The depreciation of the Ghanaian cedi against all major currencies has reached an all-time high,foreign reserves have melted down, providing further incentive to the dollarization of theeconomy. Persistent problems with power generation – leading to severe shortages for majorindustries, as well as individuals – and problems reaping the full benefits of oil production have
put additional pressure on the system. Up until the government signed a new comprehensive
agreement with the IMF, it did not display a convincing management capacity for dealing with thecrisis.
Growth rates were around 4-5% in the last two years, which is still a positive development,
although below the economy’s potential. Oil has overtaken gold as the commodity with the second
highest income, only surpassed by cocoa. The problem remains that the economic benefits ofgrowth continue to be distributed extremely unevenly and that disappointment on the part of the
population may lead to legitimacy problems for the whole political system, of which the first signs
are already visible.
In the political field, all the major parties have started to prepare themselves quite early for the2016 elections, especially with regards to choosing their respective presidential candidates. The
process has been hampered by violence in some cases and has, so far, not produced any surprisecandidates.
In general, Ghana remains a stable democracy with good economic prospects. The last two years
have shown some challenges, but measures have been put in place to address the most pressing ofthem, the big exception being providing broader segments of the population increased access tothe nation’s wealth.

BTI 2016 | Ghana

History and Characteristics of Transformation
Ghana’s first steps toward economic transformation, which could be described as a classical“development dictatorship,” preceded political reforms. After independence in 1957, the highhopes of the father of independence, President Kwame Nkrumah, were negated by socialist
experiments and an increasingly oppressive state apparatus with a high degree of personality cultcentered on the president. These circumstances led to Nkrumah’s downfall in a military coup in
1966, the first of many. Ghana then suffered several regime changes which mostly resulted inmilitary dictatorships.
From this point on, aside from the current civilian leadership, there have been only two shortperiods of civilian rule in Ghana – from the late 1960s to the early 1970s, and from 1979 to 1982.
Neither military nor civilian leadership has been able to stop the continuous decline of one of theworld’s biggest cocoa producers after prices fell in the 1960s and never again reached the heightsof the 1950s. During this period of economic decline, the political situation worsened,accompanied by a considerable increase in corruption and human rights abuses, and by inept
efforts to stem the accelerating downturn in all areas of life. After the second coup d’état by Jerry
Rawlings on New Year’s Eve 1981, an era of political stability was established – the first“revolutionary” years of the regime notwithstanding. Succumbing to pressures both from
economic realities and from international monetary institutions, Ghana’s government decided topursue a structural adjustment program “to the letter,” including a strategy for curbing rising social
violence through repression. After initiating economic reforms, the Rawlings regime hesitantly
bowed to calls for political reform. This was due in part to the growing self-confidence of thepolitical opposition after the end of the Cold War and to the acceleration of the political reform
process in neighboring countries like Benin. The introduction of multiparty politics was
accompanied by heavy criticism of Rawlings’ tight control over the political process.
Unsurprisingly, the first democratic election of 1992 was characterized by certain irregularities.
Nevertheless, despite fears of another period of dictatorship dressed up in civilian disguise, theRawlings administration, now duly elected, proved different. As a civilian president, Rawlings
was willing to adhere to constitutional procedures in general and accepted the separation of powersthat enabled the establishment of a thriving free press and an independent judiciary. Rawlings was
re-elected in 1996, but did not follow the example of other African presidents in changing theconstitution to allow him a third term.
The New Patriotic Party (NPP), the sole non-Nkrumahist party, had emerged as the only relevant
opposition in the 1990s, but boycotted the elections in 1992. In 2000, the NPP won the election,
marking the first, but not last, change of government by means of democratic election since
independence. Rawlings’ National Democratic Congress (NDC) candidate, John Atta Mills,
conceded defeat and settled into his role as leader of the opposition. The Fourth Republic survived
this crucial development without difficulty, and President Kufuor’s new administration embraced
an accelerated political and economic reform program. It did away with the last remnants of3

BTI 2016 | Ghana

dictatorship – especially certain limits to the freedom of press – and refocused its concerns on
economic development, to spur on growth after a stagnant period and a major economic setback
in 1999. While these reforms continued after Kufuor’s re-election in 2004, the lack of immediate
benefits for a wide range of the population led to the second democratic change in power in
December 2008 – January 2009. The NDC’s Atta Mills defeated the NPP’s Akuffo-Addo by avery narrow margin in the second round. After his untimely death in 2012, former Vice President
John Dramani Mahama was sworn in as president and narrowly won as the NDC candidate in
December 2012.
The economic reform program first initiated by Rawlings in the 1980s, financed and monitored by
the Bretton Woods institutions, was one of the most ambitious in African history. Its negativesocial side effects, which were controlled by the regime in a decisive manner, as well as its positiveeffects in stopping the slide of the economy and returning Ghana to a period of relatively stableeconomic growth, have been widely discussed. The program, which included the classicalapproach of liberalization and privatization, especially in regard to the highly controlled cocoa
market, was executed with diligence. However, it was carried out with less enthusiasm after the
return to democratic rule.
Progress has been made in many areas, particularly with regard to the import/export regime,
regulations controlling economic activities, and the establishment of a thriving stock exchange.
However, problems persisted. The banking sector continued to be a problem for years, andsubsequent governments have never managed to control inflation up until now. Both issues havebeen tackled with some vigor, but only the banking sector has shown signs of recovery, while
inflation remains a challenge. Nevertheless, this has had adverse effects on exchange rates, and on
the country’s dependence on the export of cocoa, and to a lesser extent, gold. Dependency on theexport of raw materials has lessened as a result of the emergence of a thriving tourism industry,
and will most probably deepen again with the start of oil production. Foreign debt management
has caused some questions as liabilities rise continuously. Corruption and bureaucratic ineptitude
remain a challenge.

4

BTI 2016 | Ghana

5

The BTI combines text analysis and numerical assessments. The score for eachquestion is provided below its respective title. The scale ranges from 1 (worst) to10 (best).

Transformation Status

I. Political Transformation
1 | Stateness

Question
Score

Although the Ghanaian political system is still riddled with political and ethnic
divisions, which sometimes lead to violence, the government’s monopoly on the useof force has not been challenged in the period under review. Fears for civil unrest inconnection with the NPP’s appeal against the presidential election results ofDecember 2012 did not materialize, and once the courts upheld the election results,
the decision was accepted. While crime remains a concern, especially in urban areas,
the general atmosphere is one of overall security. Law enforcement agencies are notgenerally regarded as competent enough to tackle future challenges. Still, they havebeen able to instill a certain degree of law and order in most parts of the country.

Monopoly on theuse of force

There are no serious problems regarding the definition of citizenship or who is a
citizen, although documentation of citizenship can be a challenge if a birth certificate
is missing. Likewise, there is no systematic policy of denying certain groups theirconstitutional rights. There are no significant groups, which fundamentally reject theidea of the Ghanaian nation-state or are in the process of implementing other formsof stateness. Ethnic conflicts, mostly over land use or succession issues in traditional
leadership settings, continue to happen periodically. While there is no state-driven
discrimination against certain ethnic groups, the politicization of ethnic loyalties
remains a disturbing and potentially dangerous feature of Ghanaian politics. The
dividing line between a political and an ethnic conflict is not always clearly drawn.
The incumbent president, John Mahama, descends from a multi-religious family andhas shown no inclination for applying religion as an instrument to solve politicalconflicts.

State identity

8

9

BTI 2016 | Ghana

6

Officially, there is separation between religion and state, especially because thecountry is divided into a poor and marginalized Muslim north and a better developed
Christian dominated south. This division continues to cause migration to themegacities of Kumasi and Accra, with incalculable risks. Politicians of all parties arecareful to avoid allowing religious sentiments to spill over into political discussions,and a certain religious balance is respected concerning top government appointments.
Ghanaian society is deeply religious and the emergence and strength of Pentecostal
and Charismatic churches has contributed to this characteristic, fueled by funds sent
to Ghana mostly by Ghanaian Americans. No politician can survive politicallywithout portraying himself as a devout religious person. Religious dogmas continue
to play an important role, at least verbally, and have to be invoked persistently forpoliticians to be successful, sometimes leading to divisive speech. Because of thestrong religious beliefs most Ghanaians hold, discrimination is possible in everyday
life and takes place, sometimes also inside state institutions, and checks against
discrimination do not always work properly.

No interference ofreligious dogmas

Basic administration is of fair quality, and is concentrated in urban areas, but remains
advanced by sub-Saharan African standards. The CPIA quality of public
administration rating (provided by the World Bank) rates Ghana continuously (20102013) at 3.5 (6 = highest quality, 1 = lowest quality), slightly above the African
average. Despite efforts for administrative reform in recent years, the visibility of thestate is still limited, especially in rural areas. Corruption remains a challenge, despite
the fact that salaries have been paid on a regular basis. It is difficult to find civil
servants willing to accept a post in rural areas, a problem which has hinderedadministrative effectiveness. Frequently, the legitimacy and image of state officials
are questioned. Moreover, the north-south divide also applies to the outreach of
public services, despite the fact that more resources were allocated to the north.

Basicadministration

7

7

2 | Political Participation

Universal suffrage, the right to campaign, and democratic elections are assured bothde jure and de facto. There have been no serious violations of the principles of free
and fair elections during the last five elections from 1996 to 2012. Ghana is one of
the few African countries with several peaceful changes of government through theballot box. The recent election of 2012 was largely free from violence, apart from a
few incidents during the campaign. The results of the presidential election, which
handed the incumbent president John Dramani Mahama a narrow victory –previously vice president, Mahama succeeded John Atta Mills, who had passed away
a few months before the election – were not initially accepted by the opposition andwere contested in court by the opposition party NPP. The courts upheld the election
results and eventually the NPP accepted the verdict.

Free and fairelections

8

BTI 2016 | Ghana

7

The elected government enjoys both legitimacy and the effective power to govern,
though within the limits of a fairly inefficient civil service. The opposition generally
accepts the rules of the game, though it has repeatedly accused the ruling NDC partyof electoral fraud and will most likely put extra scrutiny on the conduct of theupcoming elections in late 2016. Parliament and the president have real power andare not subject to any outside veto power. The military – a key player in former
periods of Ghanaian politics – has lost influence during the last decade, no longer
exercising any leverage over civilian authorities. As important economic players
enjoy some influence in party finances and a good degree of wealth is needed for
efficient campaigning in and outside political parties, economic interests have cometo play an increased role in party politics.

Effective power togovernIn general, political and civil organizations can develop, meet, organize and campaign
for their issues freely without state interference. Freedom of assembly in order todemonstrate exists, although the police are not well-trained or equipped to handle
violence in such cases. New parties establish themselves regularly, although theelectoral system discourages the successful emergence of new political forces.
Currently, and for some time now, the biggest obstacle for change in the party systemis the apparent inability of the small “Nkrumahist” parties to join forces and form aformidable “third party” to increase competition in the current two-party system,
although the two major ones – the CPP and the PNC – have renewed their efforts inthis direction. The parliamentary elections of 2012 diminished representation by third
parties to just one representative in parliament and four independents. In three special
elections in 2013, the NDC could only keep two mandates and lost one in favor of
the CPP.

Association /assembly rights

Freedom of expression is generally guaranteed and there is no organized repressionof the media. There is a danger of capable journalists being attracted away from themedia by better-paid positions in the civil service, therefore diminishing the vibrancy
of independent media outlets. The state-owned media has established a certain degreeof autonomy, but outright criticism of government policies is rare or relatively weak.
The quality of reporting has been an increasingly contentious topic, especially inregard to sensationalist tabloid papers. Electronic media, especially radio stations andthe Internet, have come to play a more important role. Internet access is freely
available in most urban areas and increasingly so in some rural parts of the country,
depending on the availability of sending masts for mobile telecommunication. In the2013 ICT Development Index provided by the International Telecommunication
Union (ITU), measuring access to and development of telecommunication services,Ghana ranks 113rd out of 166 countries. In the related subindex for access alone, it
ranks 106th. Ghana is ranked “free” by the Freedom of the Press 2014 survey
conducted by the Freedom House, and ranked third in Africa with an absolute scoreof 52, only surpassed by Cape Verde and Sao Tomé and Principe.

Freedom of
expression

9

9

8

BTI 2016 | Ghana

8

3 | Rule of Law

In Ghana’s presidential system, checks and balances generally prevail, though theexecutive branch has a tendency to dominate the system, especially if the position of
the president is filled by an energetic individual. Furthermore, the inherent attitude
of “the winner takes it all” in election campaigns forecloses any meaningful
cooperation between parties not in a coalition. The current majority of the ruling NDC
party in parliament has increased since the 2012 elections with 148 seats against 123
for the NPP and four for one Nkrumahist-party and independents. Currently the NDC
has 146 seats. Party discipline is not an overarching feature of any party. Infighting
is clearly visible in both the ruling NDC, as well as in the opposing NPP, which areboth highly fragmented into different factions. Sometimes internal conflicts erupt into
political violence. Parliamentary discourse is marked by dissent. With the continued
dissolution of the small Nkrumahist parties, Ghana can now be described as a stable
two-party system (see below).

Separation of
powersThe judiciary is by now based on a firm tradition of independence, developed as far
back as the Rawlings era. The system seems to be stable and well respected. There
has been no apparent evidence of government meddling in judicial procedures, but
the use of civil libel laws against critical journalists by individual politicians remains
a problem. Corruption and limited administrative capacity continue to pose thebiggest challenges, exemplified in unduly long legal procedures and sometimes
incomprehensible verdicts. Going to court is too expensive for the average citizen.
Only those with means can afford legal proceedings. The fact that after the elections
the opposition decided to protest mainly through the courts and afterwards accepted
the verdict is evidence of the general respect for the judiciary and its role.

Independent
judiciary

While high-ranking officials and politicians still enjoy a good degree of protection
against prosecution, recent instances in anti-corruption activities show that even
newly appointed officials of government are not safe from public scrutiny if they arefound to be involved in illegal activity. Still, corruption seems to be increasing andpublic perception of how cases are dealt with has become more and more negative.
As with the advent of oil money into the system, public awareness of high-ranking
cases of corruption has been heightened. Public discourse has become more heated.
Prosecution of known corruption cases takes place, but the proceedings are lengthy
and convictions have been slow in coming. While there exists a Whistleblowers Act
to protect witnesses in corruption cases from prosecution once they come forwardwith pertinent information, it is rarely implemented, as potential informants
frequently fear losing their well-paid employment.

Prosecution of
office abuse

8

8

5

BTI 2016 | Ghana

Civil liberties do not only exist on paper. The government and state agencies areclosely monitored by the media regarding violations of civil rights. Basic humanrights are respected and there is no systematic policy of denying individuals’
constitutional rights. Single instances of police abuse are more connected to poor
training and challenging work conditions. In areas without a significant or permanent
presence of public security officers, civil rights are often determined and protectedbased on traditional law, which does not necessarily follow the letter of public law.
This specifically refers to individuals and groups who display socially unacceptablebehavior or are accused of such (e. g. “witches”). In addition, widespread
discrimination against homosexuals exists. Civil rights violations by third parties are
not always prosecuted energetically, especially once significant economic interests
become involved.

9

Civil rights

6

4 | Stability of Democratic Institutions

Democratic institutions can be described as fully functional and stable. Although theconstitution affords the president vast powers, parliament is more than just a talking
shop. The majority of parliamentarians do take their duties seriously. Presidents only
exercise control over their own parties, and in some cases not even there, as bothmajor parties are fragmented into various competing factions. Shortcomings in theadministration are mostly of structural origin – corruption, education andunderfunding – and are less connected with undue political interference. Legitimate
processes are generally followed and constitutional regulations adhered to, althoughdisputes about their implementation and accusations of breach of law are frequent.

Performance of
democratic
institutions

Commitment to democratic procedures and institutions is high, although on different
levels. For example, two changes of government through the ballot box, still quite an
exception in Africa, have proved the high commitment to democratic institutions by
the political elites, as well as the acceptance of court verdicts to electoral disputes.
Moreover, a voter turnout of around 80% in 2012 is evidence of the public’s faith indemocratic institutions. This notwithstanding, the disparity between the affluent andthe poor imposes a danger to institutional legitimacy, if the distribution of wealthdoes not improve significantly. Corruption scandals have weakened the legitimacy of
democratic institutions among the broader population. According to the regular
Afrobarometer surveys, a disturbing trend can be seen. While commitment to thedemocratic system remains high, acceptance of democratic institutions and theirperformance has dropped over the years. This may lead to diminished legitimacy of
the whole democratic process, if not addressed properly.

Commitment todemocratic
institutions

9

8

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10

5 | Political and Social Integration

Ghana has a distinctive tradition of ideology-based political parties, which is quite
unique in an African context. This tradition has been reflected in all democratic
governments since independence, and has even persisted through Ghana’s military
dictatorships in an informal way. The Fourth Republic can boast a stable two-party
system, with active, if weak, third parties. The process of establishing a two-party
system was solidified during the 2012 elections. The two major forces are theopposition party, the NPP, and the ruling NDC party, founded by Jerry Rawlings. In
addition, a number of parties aligning themselves with Kwame Nkrumah’s socialist
tradition exist and have been able to cling to a few parliamentary seats in the past. In
2012, though, only one of them, the People’s National Convention (PNC), hasreturned to parliament with one seat, while all other third parties have been
unsuccessful. While the NPP is based on the more liberal-conservative tradition offounding fathers J.B. Danquah and Kofi Abrefa Busia, the NDC, while claiming its
own relationship to Nkrumahism, is basically a representation of the political visionof its founder, former military dictator Jerry Rawlings. With a moderate and a moreradical left wing, it comprises two parties in one, already posing an internal challenge
to his policies. Both big parties are fragmented, and splinter groups are formed on aregular basis. Still, no other party has been able to effectively challenge thesupremacy of the two major players.

Party system

8Both parties have certain ethno-regional strongholds (e.g., Volta region: NDC;
Ashanti: NPP), which was displayed again in the 2012 elections and continues toshape internal party politics. Nevertheless, both parties have also been able to gain
support outside their core regions and are in fierce competition in areas of Ghana
where neither of them traditionally claims supremacy. By-elections have consistently
shown the ability to turn a seat from one party to another if campaigns are fought
well.
Civil society and its interest groups have, with prolonged civilian rule and a growing
certainty that democracy has come to stay, asserted themselves and are visible mostly
in urban areas. One major reason for this positive development is continued donor
assistance for NGOs. Another factor is that more and more citizens appreciate thefreedoms of a civil society, and they seem to be prepared to engage themselves also
outside political parties. Steady economic growth has also placed some financial
means into the hands of a small but consistently growing urban middle class, thetraditional backbone of NGOs. In rural areas, more traditional forms of organization
persist. Religious organizations, especially the ever-rising number of Pentecostal andAfrican Independent Churches, with their accompanying institutions, are playing an
increasingly important role. Trade unionism, on the other hand, remains relatively

Interest groups

8

BTI 2016 | Ghana

11

weak and is only visible from time to time in organizing popular discontent.
Traditional leaders still exercise considerable influence by informal means.
At this point in time, around 300,000 NGOs are registered with the Ghanaian Ministryof Manpower, Education and Youth, the state’s regulating body, not counting
international NGOs.
Popular consent to democracy and the basic pillars and norms of a democratic
institutional set-up appears high despite some instances of violence and the use of
popular discontent by the parties in the election campaigns. This judgment includes
the economic and political elites, which are quite aware that their own success isdependent on the continuation of democratic governance in Ghana. The high degreeof participation in the most recent elections in 2012 (slightly above 80%, some ten
percentage points higher than in 2008) shows that the enthusiasm of voters is still
considerable. It has to be noted that legitimacy problems exist, especially in regard to
the non-delivery of certain public goods (poverty reduction, job creation) by thesystem, a sentiment which helped trigger the last change of government.
Afrobarometer surveys conducted in Ghana since the 1990s have shown a strong andincreasing commitment toward democratic values and processes, although with adiminishing support for the performance of institutions (see above).

Approval of
democracy

Self-organization has stabilized at a comparatively high level, particularly in urban
areas, and seems likely to be sustained. There is a relatively high level of trust among
the population. Traditional leaders still exercise a great deal of influence and often
function as mediators between the population and the government, especially in rural
areas. These leaders are integrated in the “House of Chiefs,” with regional “Housesof Chiefs” all over the country. A variety of these leaders – like the Asantehene of
the Ashanti – enjoy considerable moral influence, and they mostly use it responsibly
without fostering ethnic conflicts. Corruption scandals have also diminished themoral authority of traditional leaders in the last years. Spillovers from disputes, suchas the nomination of new chiefs, sometimes reach the political arena. Still, mostpoliticians are eager to align themselves with traditional leaders, as this approachenhances their legitimacy. Ethnic cleavages can be exploited by politics, and in thesecases, trust between citizens is diminishing. The role and influence of religious
leaders has been instrumental during election times, as their persistent calls forpeaceful elections have had considerable influence in the orderly manner in whichelections have taken place.

Social capital

9

7

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12

II. Economic Transformation
6 | Level of Socioeconomic Development

Ghana ranked 138th out of 187 countries in the 2014 Human Development Index.
This rank places the country in the group of countries with “medium humandevelopment” with a score of 0.573, a slight improvement from the preceding year at
0.571. Ghana scored 0.144 in the Multidimensional Poverty Index (MPI), which has
replaced the Human Poverty Index (HPI), the most current data is still only available
for 2011.
Economic development is still uneven. The north of the country is considerably
marginalized, which unfortunately correlates with the fact that most Muslims live in
the north. This reflects inequalities with regard to income as well as access to
education, and the infrastructure arrangements are better in southern Ghana. Within
the country in general, distribution of wealth is relatively uneven. The HDI adjusted
for inequality drops to a score of 0.394, a worse result than the average for mediumdevelopment countries. So far growth in specific areas, especially in agriculturalcommodities, has spread benefits within a wider part of the population, while, on theother hand, in general, wealth has continuously accumulated disproportionally for a
few.
Still, some achievements have been made in regard to equality of opportunity in thearea of education. Primary schools do not ask for school fees and both free meals andfree transport have been provided.
Outside the educational system, a difficult situation persists in terms of genderequality mainly because of economic and social problems rather than prohibitive
laws. In regard to gender equality, more policies have to be put in place. The recent
2012 Afrobarometer survey focuses on gender issues as well. The results show thataround 80% of respondents are in favor of equal rights for both sexes and only a small
percentage insists on maintaining different treatment, as dictated by tradition. This
correlates strongly with replies in the survey in regard to school enrollment, where
many strongly disapproved of statements that boys’ education should take precedence
over girls’ if funds are limited. In the Gender Inequality Index (GII), Ghana ranked
122nd out of 149 countries (data from 2013), with no change from the year before.

Question
Score

Socioeconomic
barriers

4

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13

Economic indicators

2005

2010

2013

2014

10731.932174.848584.7

38648.2

GDP$M

GDP growth

%

5.9

7.9

7.3

4.2

Inflation (CPI)

%

15.1

10.7

11.6

15.5

Unemployment

%

3.8

4.2

4.6

-

Foreign direct investment% of GDP

1.4

7.9

6.6

-

Export growth

%

-

24.6

-6.8

-

Import growth

%

-

21.0

-18.5

-

Current account balance$M-1104.6-2747.3-5685.1-

Public debt

% of GDP

48.2

46.3

56.2

69.0

External debt

$M7168.39300.115831.5-

Total debt service

$M

331.9

363.0

931.2

-

Cash surplus or deficit% of GDP

-1.4

-7.2

-

-

Tax revenue% of GDP

21.3

13.4

-

-

Government consumption% of GDP

15.3

10.4

16.4

-

Public expnd. on education% of GDP

7.4

5.5

-

-

Public expnd. on health% of GDP

2.9

3.8

3.3

-

R&D expenditure% of GDP

-

0.38

-

-

Military expenditure% of GDP

0.6

0.4

0.5

0.5

Sources (as of October 2015): The World Bank, World Development Indicators 2015 | International
Monetary Fund (IMF), World Economic Outlook, October 2015 | Stockholm International Peace
Research Institute (SIPRI), Military Expenditure Database 2015.

7 | Organization of the Market and Competition

The institutional framework for promoting free markets and competition has beenslightly improved, though progress was recently brought to a halt. In the 2014 WorldBank Doing Business report, which scrutinized the ease of doing business in 183
countries, Ghana ranked 67th (as compared to 62nd in the 2013 report and to 63rd in
the 2012 report). Still, within Africa, only Mauritius, South Africa, Botswana,
Tunisia and Rwanda performed better. Economic reforms under the supervision of
the Bretton Woods institutions have helped to create a market-driven approach. Thereis a high degree of market competition, hindered mostly by limited access toaffordable loans and some red tape. Market distortion by subsidies still exists,

Market-based
competition

6

BTI 2016 | Ghana

14

especially with a substantial sum spent on utilities. Reducing subsidies is a very
difficult task to accomplish politically. However, the issue is highly politicized andsensitive, especially in election years. The pricing regime is market-oriented andliberal. In general, direct intervention by government has been limited, though thestate still plays a major role as a contractor of private businesses and the biggest
provider of formal employment in the country. Labor laws remain quite restrictive,
though the effectiveness of regulations is doubtful in view of the strong informal
economy. Many of the problems businesses in the formal sector encounter do notstem from regulations, but rather from administrative inertia and corruption.
Currency problems, especially high inflation and a strong tendency towards
dollarization, persist and have still not been tackled efficiently. For most of the urban
poor and rural dwellers, who do not participate in the production of cash crops, theinformal sector remains a major source of income. A lot of economic activity only
occurs in the informal sector because of the inability of the administrative system toproperly register and supervise the economy. Still, the relatively strong performanceof the non-oil-sector in recent years shows that, as of now, the influx of oil-money
has not led to serious market distortions; this is supported by the government’s
ongoing problem to properly account for all the taxes it is legally entitled to collectfrom oil production.
The formation of monopolies or oligopolies is generally not regulated. Government
monopolies have dwindled in size and reach, although state influence in marketing
activities remains significant, especially in regard to cash crops like cocoa andthrough its system of subsidies. Private entrepreneurs produce and trade the majorcommodities with the major exception of oil, where production and sale is highly
concentrated. While the influence of foreign investors is still significant, and theinflux of foreign direct investment (FDI) has persistently increased in years before, it
took a dip in 2013, totaling nearly $4 billion, down from $5 billion in the previous
year. In cases where takeovers of local firms are significant for the market, public
scrutiny is relatively high. Generally, no policy is in places to counteract price fixing
or predatory pricing. However, there is not a dire need for such policies given that no
major instance of that kind has been reported in the period under review.

Anti-monopoly
policyLevels of protection are generally low in comparison with other African countries.
This has not changed profoundly after the takeover of government by the more“socialist” leaning NDC. Calls for more protectionism have, however, been raised
persistently by the left wing of the ruling NDC. The most protected economic area
remains agriculture, followed by manufacturing. On the other hand, Ghana grants a
number of duty and tax concessions under various incentive schemes aimed at vitalcommodities or capital goods. In general, there is a trend to slowly lower tariffbarriers, and this trend might accelerate as soon as other forms of income – especiallyoil revenue – can replace income from tariffs. Because of the relative modest size inoil revenue due to production problems, this has not materialized yet.

Liberalization offoreign trade

5

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BTI 2016 | Ghana

15

Ghana is not fully integrated into the world market (as it is mainly a producer of raw
materials) and Ghana’s participation in WTO activities has been, as for most African
nations, quite marginal. Aside from regular attendance, no significant proposals havebeen formulated. In general, Ghana has been following the rules of the WTO withregard to tariffs and undergoes WTO reviews on a regular basis without majorcomplaints.
Ghana still maintains a list of products that require licenses to import and a numberof fees apply to the trade to certain goods. A relatively high “inspection fee” ischarged for all goods entering the country. In order to protect local industries, shortterm bans on the import of certain goods (like canned fish) are enacted from time totime. Protection of intellectual property rights is very weak.
The legal underpinnings of the banking sector and the capital market are welldesigned, although some weaknesses persist, especially in the connection between
central bank directives and the responsiveness of private banks (e.g., the effect of theinterest prime rate set by the central bank). The market-driven approach has helped
to stimulate the aforementioned expansion of the private banking sector. This in turnhas increased competition and the availability of banking services beyond majorurban areas. In addition, credit growth has been remarkable, therefore giving further
incentives to local business to invest. The major problem remains to be the “missing
middle,” as microfinance institutions take care of the poor’s credit needs and banks
cater mainly to very big corporations and multinationals, leaving a visible gap forsmall- and medium-sized businesses, a total market share of about 30%, to obtaineasy access to loans. The government, with technical support from the World Bank,
has further increased its focus on banks’ risk management capacity, including therecapitalization of problematic banks as well as strengthening audit procedures.

Banking system

8

The Ghanaian central bank enjoys a good degree of autonomy in the system, but it is
not always effective in influencing the banking sector. The Ghanaian stock exchange
in Accra has continued to play an important role in attracting investment and raising
capital. It is the second largest in West Africa after Lagos. In 2014, it had a market
capitalization of close to $20 million, a slight drop from the preceding year.

8 | Currency and Price Stability

Ghana’s management of its own currency, the cedi, is mostly affected by the problem
of inflation, and increasingly, depreciation, which developed rapidly in 2014, hasreached a dangerous level. Inflation has risen to a peak of more than 17% in
November 2014, without any indication that the (largely autonomous) central bankis able keep the rise under control. Monetary policy was tightened considerably by
the Bank of Ghana, which increased the interest rate to 19% in 2014. However, thisdid not have a significant effect on the inflationary trend. While the bank set theAnti-inflation /forex policy

5

BTI 2016 | Ghana

16benchmark for inflation at 11.5% for 2015, analysts are in serious doubt that this goal
can be achieved.
Exchange rates for foreign currencies are volatile and the influence of the central
bank on keeping them in check is limited. This was demonstrated by the continued
massive depreciation of the cedi in 2013 and 2014, which was barely kept undercontrol. The cedi depreciated by 14.6% against the U.S. dollar in 2013, and 26.7% in
the first half of 2014, which is best described as a near collapse. Foreign reserves
have continued to dwindle in the period under review to an all time low of $1.2
billion. Dollarization of the economy has continued to put pressure on the cedi aswell, as citizens prefer to put their savings in a less inflation-prone external currency.
Fiscal policy has been problematic in the period under review, both in regards to the
management of debt, as well as the fiscal deficit. The fiscal deficit grew significantly,
reaching close to 10% in 2014. Oil revenue has not been as high as expected, due toa lack of taxation, but has had some impact on fiscal policies in 2013 and 2014.
Despite this, the outlook for 2015 does not foresee a deficit less than 7%, which isstill considerable, especially in connection to the mounting external debt anddwindling external reserves.

Macrostability

6

The debt burden has increased considerably. [External?] Debt stocks rose from $8.4
billion in 2011 to $10.1 billion in 2013, and reached $12.6 billion in 2014. Added tothis is a domestic debt stock of around $13 billion. This means that public debt stands
now at nearly 60% of GDP, approaching 70% in 2015. At the same time, GDP growthunderperformed in comparison to preceding years; this poses a serious challenge. The
IMF repeatedly warned the Ghanaian government that these debt levels areunsustainable and that the government underreported the true nature of the burden in
2014. Because of these developments, all major rating agencies have significantly
downgraded Ghana in 2014.

9 | Private Property

Property rights are adequately defined and generally protected. However,shortcomings in the rule of law, especially with respect to lengthy legal procedures
and corruption, do exist and access to judicial proceedings is only available for the
better off. In rural areas, private property rights are occasionally overshadowed bycommunal or traditional property distribution and usage systems. Disputes in rural
areas are either settled by traditional authorities or, in some cases, by violence.
Foreigners, including investors, are not allowed to purchase land, but can lease it.

Property rights

8

BTI 2016 | Ghana

Private companies have played a major role in economic policy in recent years.
Access to credit has become easier, but the policy of high interest rates in order tocurb inflation makes repayment a challenge and SMEs still face serious problems inaccessing credit. FDI has slacked recently. Privatization is mostly an issue in regard
to the remaining major state enterprises, especially in regard to utilities. A major
challenge for any private enterprise remains the structural weakness of the material
infrastructure – especially transport – and problems with power generation. In
December 2014, the government announced a power cut for major companies for 48
hours, commencing six days of supply afterwards. Together with the high inflation
rate, investment by the private sector has been hampered significantly by theseelectricity shortages. As mentioned above, Ghana ranked 67th in the Doing Business
report (as compared to 62nd in the 2013 report and to 63rd in the 2012 report), andwas ranked 66th overall (4th in Africa) in the Heritage Foundation’s Index of
Economic Freedom (among a total of 178 countries under scrutiny), an improvement
over the last several years.

17

Private enterprise7

10 | Welfare Regime

The welfare regime of Ghana consists mainly of indirect contributions. These are
primarily either direct subsidies to essential commodities – like energy or fuel – orindirect subsidies through exemption from taxes on goods like food, which is
exempted from Value Added Tax (VAT). In addition, special programs are available
to certain targeted groups both in the sectors of health (against specific diseases likemalaria, AIDS or tuberculosis) and education (with free meals and transport for
primary school pupils). Furthermore, a health insurance scheme exists, which is notcompulsory and does not always work effectively. The government’s preparations todeal with Ebola, after outbreaks in neighboring countries, have been described as
inadequate and below the standards the authorities responsible have set forthemselves; fortunately, no infection was reported in the period under review. Life
expectancy at birth has risen consistently. While it was below 60 years in 2005, life
expectancy reached 63 in 2012. Direct monetary support is only available for very
distinct target groups such as orphans or those who take care of them. Access to
support for these target groups is, however, hampered by administrative inertia anddeficits in the outreach of distributive organizations, especially in rural areas. Basic
problems like child malnutrition and certain pervasive diseases persist, but Ghana has
made some progress in these areas. Aside from the informal sector, which is still the
primary avenue of making ends meet for many, private remittances from abroad havean important impact on the livelihood of many Ghanaians, both through direct
consumption as well as through the secondary effects of investments. It remains tobe seen whether the influx of oil money will create pressure to develop a wider social
safety net. The current fiscal problems do not bode well with regards to this. In recent
years, the government has spent around 3% of GDP on health care.

Social safety nets

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BTI 2016 | Ghana

As has already been partly assessed, some achievements have been made in regard toequality of opportunity in education. Primary schools do not ask for school fees andgovernment provides both free meals and free transport. The increase in school
enrollment has put a heavy burden on important indicators like teacher – pupil ratio
and the infrastructural condition of primary schools. For secondary schools,
scholarships exist, including money made available by traditional leaders for giftedchildren in their area of influence. While more progress needs to be made, the overall
trend seems to be encouraging. The biggest problem seems to be access to secondary
schools and universities, where school and tuition fees pose an insurmountablechallenge for most talented children from poor families.

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Equal opportunity

6

Outside the education system, inequalities persist mainly because of economic andsocial problems rather than prohibitive laws. Public perception in regard to genderequality is slowly moving against structural discrimination, as the Afrobarometer
surveys have indicated. Still, traditional values of family-life and the role of womenin society persist even in modern urban areas, putting pressure on women to pursue
a career while shouldering the full responsibility of housework and raising children.
In recent times, discussions about the treatment of homosexuals have been taking
place, mostly induced from abroad. The deeply conservative and discriminatory
attitude of the majority of opinion leaders in both the political arena and in civilsociety has become quite apparent in this case.
In general, no structural discrimination based on ethnicity exists, but northern
Muslims are generally regarded as less capable of skilled employment, and even wellqualified individuals have to overcome prejudices. They face some discriminatory
practices in government institutions and the majority of those migrating to the south
are limited to menial jobs with low incomes.
Employment statistics are scarce and unreliable, especially in regard to the informal
sector. Studies of the informal economy suggest that women carry the major burdenof working for subsistence wages in this sector, a pattern consistent with other
African societies.

11 | Economic Performance

Macroeconomic data show that the Ghanaian economy has been growing steadily,but has experienced some serious setbacks in recent years. After weathering thefinancial crisis of 2008 and its aftermath quite well, self-inflicted problems haveplagued economic performance in recent times. Economic growth peaked close to
15% in 2011, and showed strong 8% growth in 2012, but went down considerably to
4.4% in 2013, only to rise slowly to 5.6% in 2014. The peak of 2011 has been
attributed mostly to the first big intake of oil revenue, but other sectors – cocoa andgold – have also recorded strong and persistent growth. Oil revenue has been less

Output strength

7

BTI 2016 | Ghanathan expected in subsequent years because of production problems. Once these were
overcome, challenges persisted in reaping the full benefits, especially because of the
failure to collect taxes due from the production and export of oil. Still, in 2014, oilreplaced gold as the country’s second highest income earner, only surpassed bycocoa. Therefore, other economic activities remain vital for the future economic
development of the country and indeed, when growth has occurred, it has been
relatively broad-based. Continued and persistent donor support and high levels ofremittances from abroad have added to the positive outlook, although the total
percentage of ODA to GDP has diminished significantly over the years. The
challenges to economic growth include persistently high inflation, now clearly above
10%, as well as the weakening of the cedi vis-a-vis major currencies, as has alreadybeen highlighted. The fiscal deficit and debt burden have diminished thegovernment’s ability to make necessary adjustments. A new cooperation agreementwith the IMF, to be fully implemented in the near future, is seen as a way out of thepredicament, as it might shift the burden of unpopular measures to an external actor.
Still, the upcoming elections in 2016 will hamper fast progress, as the government
will be wary of introducing too stringent measures and will see the need to hand out
election-related presents to important stakeholders and constituencies. Observers
expect growth in 2016 to be not higher than 6.5% under the best circumstances.
While commodities were the driving force behind recent economic development,
manufacturing has been less impressive. Exports in finished goods and imports ofcapital investment have been hampered by high inflation, the relatively weakcurrency and a plunging exchange rate – which hampers the import of capital goods.
In contrast, the service sector has continued to enjoy growth and diversification.
Ghana is now ranked as a lower-middle-income country.
Foreign direct investment has diminished considerably. Once measures to curb
inflation and to put public expenditure on a more firm footing are implemented, anddepending on the general economic climate, an increase in investment is possible in2015.
Official employment statistics have to be taken with a grain of salt, as they do notcover the important informal sector and, therefore, only provide a limited view.
Economic growth in Ghana has been consistently above population growth, which
has hovered around 2% for the past years. The issue in Ghana is less the generationof wealth, but more its distribution.

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BTI 2016 | Ghana

20

12 | Sustainability

Environmental issues do not play a significant role in political and economic
decision-making, despite public declarations to the contrary. A “National
Environmental Action Plan” has been promulgated, as well as a “National Climate
Change Policy Framework,” but implementation has not been impressive so far.
Ghana lacks an adequate environmental monitoring system, mainly because theresponsible ministry’s funding is restricted and not used efficiently. The far morepressing issues of addressing abject poverty and, at the same time, strengthening theperformance of state institutions, override environmental concerns. The main topic
of the last election campaign was education, and, to a lesser degree, infrastructuralinvestment in general, and judging from early campaigning in 2014, these issues willremain at the forefront. Therefore, the environmental consequences of investments
are only scrutinized seriously if and when donor assistance or international
agreements are involved. This relates also to the emerging oil sector and the possible
environmental hazards of offshore production. Environmental protection is rarely
discussed and many policies lack proper implementation. The tax system barely takes
environmental issues into account. As long as economic challenges exist, this picture
will not change fundamentally. Land degradation has become an important challenge
for the agricultural sector, especially in the more arid areas in the north, which might
generate an economic incentive to tackle this specific environmental issue with morediligence. The relative success of tourism and the interest of visitors in a clean
environment have at least increased environmental awareness. Until awareness isheightened, it will probably be the donor community’s task to act as an advocate forenvironmental sustainability, as well as that of NGOs dealing with the matter. The
fact that the government has – together with private investors – invested heavily inhydroelectric power has less to do with environmental concern than with theabundance of water power. Efforts to utilize natural gas for energy production havealso increased. At the same time, the traffic situation in major cities has worsened
considerably, as the emerging middle class acquires vehicles. Not surprisingly, theEnvironmental Performance Index (EPI) 2014 places Ghana only at 151st out of 178
countries, with a score of 32 out of a maximum of 100. The EPI report indicates that
progress has been made in the areas of agriculture and water and sanitation, while thesituation in regard to sustainable use of maritime resources has worsened.

Environmental
policyEducation was the most important topic of public debate during the last election
campaign and will continue to be of high importance. Ghana’s education system has
been improving slowly, but successfully. The focus on primary education andincreasing teacher training has shown some tangible results, especially with regard to
overall enrollment. Building maintenance and teaching quality remain major
problems, especially in the country’s north, but also in some urban areas. The current
government’s declared intent to use significant portions of the oil revenue to enhance

Education policy /
R&D

5

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BTI 2016 | Ghana

the education system further bodes well for the future. In any case, donor assistancewill continue to play a critical role in improving education, especially in capacity
building.
Ghanaians with the means to study abroad generally do, especially for masters and
PhD degrees. With some exceptions in the areas of agriculture and mining, R&D
exists only at a very basic level. Experts working in the most productive andtechnically advanced areas of the economy are generally trained abroad.
Government expenditure for education hovers around 5-6% of GDP and normally alittle less than 25-30% of the overall budget, therefore constituting a large share.
Around a third of the education budget goes into primary education, another third
into the two tiers of secondary education (junior and senior), a very small percentage
into technical and vocational education (around 1%), and the rest into the tertiary
system. Teachers enjoyed a pay raise of 19% in 2012 (along with all other public
servants), increasing the burden of salaries on the state budget. Aside from salaries,
many schools still lack proper equipment and materials, especially in the area of
vocational training and in institutions of higher education. With a literacy rate ofabout 71% in 2012, Ghana is still among the last third in worldwide literacy.

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BTI 2016 | Ghana

22

Transformation Management

I. Level of Difficulty

Ghana shares some of the structural constraints of other African countries, but has
achieved some progress in overcoming these challenges and its potential in doing so
in the future has increased. While neither geographical location nor lack of natural
resources form an impediment to management (quite the contrary), one of the major
problems that Ghana faces is persistent abject poverty throughout the country, with
the north disproportionately affected. Much of the problem is rooted in educational
deficiencies, which result in a poorly trained workforce, and a social system that isboth underfunded and challenged with an ever-growing population. Administrativeinertia and corruption form another cluster of structural constraints. A thoroughrevision of the public workforce to eliminate “ghost workers” and a significant risein salaries have been first steps in addressing the problem. Future reforms will likely
be hampered, however, by the lack of efficient and effective institutions to fully
implement even very sound policy changes and the need to keep a significant part ofthe electorate happy, especially before elections. Ghana also continues to facechallenges in its health system, which is still unable to consistently address somemajor public health challenges. Ghana has not been severely affected by epidemic
diseases in the period under review, although Ebola has been a challenge inneighboring countries.

Structural
constraints

Ghana is a country with an increasingly well-grounded tradition of civil society,enhanced and supported by both donor assistance as well a regulatory framework andpolitical culture that allow freedom of organization and expression. With strong
traditions in self-help and communal support systems, CSOs often find fertile groundfor their activities, although more modern groups – that address more complex
political issues – are concentrated in urban areas. Civil society groups are outspoken
and well trained in using the media to voice their opinions and interact withgovernment, but some are used as instruments of political party interests and others
are merely agencies to channel foreign aid into the country. Therefore, it is not always
easy to differentiate between NGOs which are “independent” and those with strong
affiliations to a political party and/or a leading politician. This became apparent
during the last election campaigns. In some areas – like health – responsible
ministries are actively engaging NGOs in pursuing their goals, exemplifying a good

Civil society
traditions

6

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BTI 2016 | Ghana

23

relationship between public and non-public actors. In summary, the development ofcivil society can be regarded as positive. With the increasing lack of trust of amajority of the population in the performance of state institutions, CSOs will
increasingly be regarded as a viable alternative and should be able to improve theirrole in the Ghanaian society even further.
Generally, Ghana is not a country of intense and violent ethnic and political conflicts.
Still, the march towards the elections in 2016 has started, and already politicalconflicts have erupted in violent incidents. The social fabric of society and thecoercive power of government institutions are not strong enough to effectively
prevent political or ethnic violence in every instance. Outbursts occur, especially in
an atmosphere of heated political competition before elections, as the infighting in
the opposition NPP in August 2014 has proven. The country is clearly split into
religious and ethnic groups, although the ethnic card has not been played as strongly
as in other African countries. While conflicts persist and can be exploited for politicalmeans – something which will continue in the foreseeable future – they do not occur
frequently enough to undermine day-to-day life in Ghana.

Conflict intensity

4

The major potential conflict remains the north – south dichotomy, which is both areligious and an economic divide, and can potentially be exploited. While religious
conflict, especially between the Muslim and Christian communities, is not a featureof Ghanaian society, the aggravating influence of economic challenges carries thedanger of spillovers. In addition, the government has to be keenly aware of potential
influences from less stable neighboring countries. The permanent infighting in bothmajor parties, split into many factions, is also a potential source of trouble.

II. Management Performance
14 | Steering Capability

Because of its close cooperation with the donor community, exemplified by arenewed cooperation agreement with the IMF, the implementation of which willcommence in early 2015, and the constraints of strong inflation, the government has
pursued a pragmatic course in the past. This has been intermittently disturbed by thedishing out of election presents and, during the period under review, hints of financial
mismanagement. It has focused on the economic sector and essential reform of theadministrative service, highlighting financial administration on the lower levels,
without maintaining the required fiscal discipline. Prioritization of goals has been acontinuous challenge as the president is forced to adjust to external circumstances,on the one hand, and demands by his own party on the other. It is to be expected that

Question
Score

Prioritization

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BTI 2016 | Ghana

24

the government will continue to rely on donor sympathy in order to accomplish
certain development goals, less in regard to finances – as the country can fund its
commitments, at least theoretically, from its own income – and more in regard to
management and human capacity. Some reforms – like in the public service or in thebanking sector – have gone well so far. In any case, the government is pursuing its
goals within the limits of constitutional law.
Gaining and organizing expertise is an ongoing challenge because Ghana is notproducing the necessary manpower to provide it, and tertiary education is hamperedby quality problems and barriers to access. The government has to rely on external
advice in many cases, either provided by the donor community or purchased at great
expense. Strategic planning units in ministries and parastatals are chronicallyunderstaffed or underqualified and not always up to the task, as has been shown by
the continuous inability of relevant ministries to develop strategic plans.
Efficiency in implementation is hampered by a still relatively inefficientadministrative system with serious challenges in expertise and dedication. This mightchange when the ongoing reform of Ghana’s public administration takes root, but
progress is still not visible. In areas where successive governments wielded their fullpolitical will – such as education – long-term goals have been implemented withconsiderable success, but not always based on a strategic planning process thatencourages operationalization. The political system still very much centered on theindividual strength, ability and willpower of high-ranking officials. Their individual
behavior and priorities still significantly influences implementation. Apart from thisunderlying feature, the effects of capacity development have taken root where donorcooperation has been consistent or where strong economic interest has developed.
While the administrative system is still riddled by inertia, change agents can be
identified and reform is taking place, although not always at the necessary speed. In
comparison to other African states, Ghana scores relatively well with regard to its
ability to implement. Pervasive corruption, fueled by access to “easy money” fromresource revenues, might pose a challenge to future efforts to develop both efficiency
and effectiveness.

Implementation

In general, it is difficult to determine from past experience how many changes andreforms are actually direct consequences of institutional learning by government or a
result of external influence. Generally, the balance has been tilted towards the latter.
Having said this, it is apparent that where challenges are identified, public institutions
are generally ready and willing to initiate adjustments and to avoid or rectify mistakesof the past, especially in the face of public scrutiny or media attention. On the other
hand, the recent instances of lack of fiscal discipline show that past experiences inthis area have not led to lessons truly learnt. The willingness of the government toseek outside help, recognizing that issues have gone out of control, is a sign ofwillingness to react to mistakes properly. The various ongoing reforms show that the
government is generally ready to identify its shortcomings and take steps to improve

Policy learning

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25

its policies. Still, as mentioned earlier, Ghana relies significantly on external advice
and expertise from development partners in many areas of change management. Thisis, in itself, not a problem, as employment of this expertise is already an indicator of
the general willingness to be innovative. The potential danger is that innovation canbe externally driven, and that public institutions only follow along with this external
drive, making ownership of change processes at least questionable. The recent
problems on the fiscal side give an indication that this is unfortunately still true.

15 | Resource Efficiency

The government is only partly using its available resources efficiently, and efficiency
has not been increasing in the period under review. This is mainly due to long
bureaucratic delays in implementing policies and a lack of professionalism. State
resources are wasted through corruption and there is a clear lack of customer-oriented
service culture, even in the tourism sector. However, visible and systematic selfenrichment by leading politicians is not a common feature in Ghana, although casesof corruption have surfaced and are reported. At the cabinet level, politicallymotivated dismissals or removals have been evident in the past, especially involving
potential contenders for the presidency. Change of government typically entails a
reshuffle in the higher echelons of administration as well.
Fiscal discipline has decreased in the period under review. Liquidity problems
surface at regular intervals and indiscriminate borrowing has become a worrying
feature of the current government. A balanced budget will be possible with increased
oil revenue, but this has not been achieved in the last two years. The deficit willremain even with full implementation of the newly agreed upon IMF cooperation.
The government has exploited weaknesses in the Petroleum Revenue Management
Act (PRMA) to increase its spending of petroleum revenues meant for saving in the
Stabilization Fund.
Foreign reserves develop in a volatile fashion, especially as long as the central banktries to intervene in the market to stabilize the exchange rate. They have diminishedconsiderably in the last two years. Despite a central government, the influence ofregional and local leaders is still considerable and has been enhanced by a process ofdecentralization. Still, the allocation of resources from Accra means that the central
government maintains a certain degree of control over expenditures at all levels.
There has not been a serious problem with diversion of funds and the inappropriate
use of otherwise designated budget allocations – at least until recently. Budget
calculation has been less conservative in recent times, leading to a misbalance in the
inflow and outflow of funds.

Efficient use of
assets5

BTI 2016 | Ghana

26

In general, the administrative system is still bloated, as lay-offs are highly unpopularand politically dangerous. Consequently, even well-meaning administrative reforms
have only been partially successful.
In general, government policy is quite coherent, as, all important decisions are taken
centrally, despite all decentralization efforts. While competition between ministers
and state agencies exists, as in any other democracy, these actors have not seriously
blocked policymaking processes when the political will from the center has beenstrong. Some overlap in responsibilities still exists, especially between ministries, butalso between public institutions aligned to certain ministries. An important challenge
for Ghana is donor cooperation, which has been partly solved by the multi-donor
approach employed in the country. It remains to be seen whether the new IMF
agreement will be coherently implemented. Donor coordination has become lessimportant as the share of ODA in comparison to other forms of income has dropped
significantly over the years, while Ghana is still seen as an attractive country formeaningful development initiatives.

Policycoordination

Ghanaian anti-corruption policy falls under a number of legal regulations andinstitutions. In addition to committees of inquiry set up by parliament and the regular
work of the auditor general, the highly important Whistleblower Act of 2006 protects
witnesses and informants who reveal corrupt and other criminal practices. An
Economic and Organized Crime Office, inaugurated in 2010, provides a specialized
police agency with the authority to investigate, prosecute and recover the proceedsof crime, including high-level corruption.

Anti-corruption
policyAuditing of state spending is, in comparison to other African countries, on a quite
sophisticated level, although in recent times, political meddling in the interpretationof results has become evident. The newly agreed upon cooperation with the IMF will
partly focus on these management issues and related transparency in reporting andanalysis.
Political parties face serious challenges in financing their organizational structure andthey depend heavily on the generosity of party “big wigs” to sustain campaigns andpay the salaries of their leaders. Fundraising and donations are the major sources ofincome, and there are no clear public guidelines, nor is there any state-fundedfinancing instrument for political parties.
The transparency of the public procurement system is as questionable as themonitoring of codes of conduct and similar provisions. With the influx of oil revenue,
the Public Procurement Act of 2003 has become more important, as it is still one of
the most comprehensive legal regulations in Africa in regard to the administration of
public tenders, although it is not always implemented to the letter. Scrutiny of thefree media has helped to keep officials in check on a certain level, and auditing
processes have led to sometimes damning conclusions. Still, corruption pervades all

7

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BTI 2016 | Ghana

27

levels of state administration, and will continue to do so as long as administration
remains weak and the government continues to be the major investor and contractor
in the economy.
Ghana does not have any freedom of information law and access relies on the
goodwill of public institutions or the scrutiny of capable journalists. Concerning the
expected oil revenue, the government has repeatedly promised to publish all related
contracts and agreements in order to ensure transparency and avoid corrupt practices.
So far, Ghana’s oil revenue has generally been accounted for.

16 | Consensus-Building

The political leaders of both big parties have repeatedly voiced their determination
to maintain and improve the democratic system of government. However, the lastelection campaign, as well as the beginning of the campaign for 2016 in the last year,
point to the fact that the trust in the opponent’s credibility and prudence in adhering
to democratic principles is limited. All current indicators point to a general
acceptance of the democratic system, despite the persistence of a strong left wingfaction in the now ruling NDC and smaller – increasingly irrelevant – Nkrumahistgroups with socialist leanings. The biggest danger lies in the areas of corruption andnon-performance of state institutions, not in a lack of consensus about the system.

Consensus on goals

8

Only those politicians leaning farthest to the leftist traditions of Nkrumahism voice
profound criticism in regard to the basic principles of a liberal market economy.
These individuals are marginalized, even in clearly outspoken Nkrumahist parties,
and have only limited influence in the left wing of the currently ruling NDC. As
liberal reforms and a market-driven approach to generating wealth has provenbeneficial, the general population is less concerned with the question of whether themarket works, but more with the problem that state intervention alleviates
discrepancies in the distribution of wealth only on a very limited scale. Dissent
therefore does exist in some specific areas, especially with respect to privatization of
public utilities, the role of foreign investment, the growth of state influence and the
expansion of social programs.
For the most part, extra-governmental anti-democratic veto actors do not exist.
Generally, the military is no longer an active political power. Given this, it is notablethat among state institutions, according to the latest Afrobarometer results, it is themilitary that enjoys the highest approval ratings among the general population.
Although this is not necessarily problematic in and of itself, it might lead to
ambitions, if the general acceptance of the ruling political elite should deteriorate
further and this decline in acceptance becomes more visible.

Anti-democratic
actors9

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28

Consensus on the political system and its basic principles is high among both thepolitical elite as well as the population. The opposition acts within the constitutionalframework. Dissatisfaction is currently channeled either through the courts or byforming new parties, or, in some instances, by political violence of a very limited
scale.
Most investment is still directed to the relatively developed south, although thecountry has tried to provide basic services, such as education and health care, to thenorth with some notable success. Many activities in the north are nevertheless donor
driven. While the inclusion of important political leaders from the north remains anactive policy, the country’s basic cleavages are still evident. There was no active
encouragement of ethnic and social divisions during the latest election campaign orin daily politics, but politicians exploiting them for electoral gain are discernible.
Generally, the NDC-government has not tried to actively exploit cleavages.
Likewise, the presidential candidates repeatedly tried to reach out to all regions inorder to be elected on a national platform. At this point of time, cleavage-based
conflicts are generally prevented from escalating, but are exploited up to a certain
level. The equilibrium maintained is unfortunately not necessarily a stable one.

Cleavage /conflict
management

Civil society actors are encouraged to participate in agenda-setting and policy
formulation up to a certain level, in particular when government wants to display its
commitment to transparency or to address certain pressing issues. Sometimes, theknowledge of specialized NGOs is used to overcome lacks of expertise in state
institutions. The ongoing partnership with many NGOs in the area of health policy isa good example of this effort. In the area of education, government has actively
encouraged civil society actors to become stakeholders in the education system inorder to accelerate the progress of initiated reforms. However, elected politicians andofficials in public administration still show an aloof or even arrogant attitude after
elections. Cases exist in which criticism or questions by civil society actors are
regarded as unwarranted and disrespectful. Instances of this have increased as trustin the political elite seems to diminish. Generally, though, the political elite has cometo accept the role of an active civil society, even if the relationship is sometimes
strained. In some cases, politicians actively use civil society organizations for theirown means.

Civil society
participation

Apart from the alleged crimes committed during Rawlings’ military dictatorship,
there are no historic events that might require reconciliation. Rawlings’ pastwrongdoing is no longer a “hot potato” in the political discussion as Rawlings’
influence, even within his own party, has diminished. Increasingly, other political
topics dominate the agenda. The overwhelming attitude of Ghanaians, as well as ofthe political elite, is to allow the past to rest. There is a general consensus that digging
up evidence against Rawlings would undermine the peace of the general politicalsituation.

Reconciliation

7

7

n/a

BTI 2016 | Ghana

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17 | International Cooperation

The government has continued to rely on the support of international development
partners, even if the share of ODA in comparison with other forms of income has
shrunk over the years. While reliance on donor support can be criticized as
dependency, the blueprint of international development agreements has helped
Ghana to establish and maintain a reputation as a reliable and trustworthy partner indevelopment. This has been proven in recent times by the conclusion of a new IMF
agreement, which has laid some concerns about the continued fiscal indiscipline of
the government to rest, and has improved the outlook of many observers. Despite
written long-term strategies, short-term decision-making interferes repeatedly,
especially when elections are approaching. Road maps exist in the form of a variety
of strategic plans, but they are not always followed through and are sometimes
victims of political whim. Ghanaian institutions are not always up to the task of
renewing strategic plans and have difficulties in analyzing data and/or generating
new data without help from outside. Given Ghana’s role as a model democracy inWest Africa, deviations and setbacks are tolerated by the donor community and theunderpinnings of public policy or rarely called into question.

Effective use of
supportThe government is not only very interested in international cooperation, but it has
proven to be a cooperative, constructive and reliable partner in the international
arena, if not always a dynamic one. Ghana’s good reputation for democracy andstability has helped to improve the political image of the country in the international
arena. The country enjoys good relationships with the Bretton Woods institutions andthe donor community as a whole. Ghana also entered and supported the New
Partnership for Africa’s Development (NEPAD) process from its inception, and wasamong the first to participate in the peer review mechanism.

Credibility

89

As mentioned above, Ghana’s climate for Doing Business with outsiders is relatively
good by African standards (4th in sub-Saharan Africa), though only ranking 67th in
the last Doing Business report by the World Bank.
Ghana’s record in its relations with neighboring countries is for the most part
positive. At no time during the last two years has the government acted in athreatening way or caused any conflict with its neighbors. Ghana’s relationship with
its traditional adversary, Togo, has improved considerably. Some disagreement has
surfaced repeatedly with Cote d’Ivoire, mostly over maritime borders (andsubsequently the right to the offshore oil deposits). Recent negotiations failed andGhana considered asking an international court for mediation in this matter. Strong
ties exist with Nigeria, although the relationship has sometimes been contradictory.
Ghana has shown a persistent commitment to the objectives of the Economic
Community of West African States (ECOWAS), but regional integration is notamong the highest priorities of the government (as has been exemplified by the factthat the country missed the recent deadline to implement the organization’s common
external tariff (CET).

Regional
cooperation

8

BTI 2016 | Ghana

Strategic Outlook
Ghana’s strategic challenges for the coming years continue to be difficult to tackle. Fiscal
indiscipline has shown that gains in effectiveness and efficiency cannot be trusted to beirreversible. The government must manage all revenue in a way that pleases an increasingly
attentive electorate and meets the standards of proper financial administration, including thenecessary transparency and avoidance of squandering and corruption. The challenge is to renew
trust in the performance of the system with the subsequent task of communicating gains inaccountability to the population so as to stop the growing perception that the state is not performing
well enough. While democracy seems to be well embedded in the Ghanaian polity, it is necessary
to ensure that no erosion of trust or support takes place. Furthermore, the Ebola crisis has provenagain that Ghana must maintain a watchful eye over regional security, stability and the influenceneighboring countries can and will have on the wellbeing of the state.
In order to face these two challenges, Ghana’s government not only has to increase its own
vigilance against the temptation to gain short-term advantages through reckless spending, but it
also has to continue its close cooperation and financial monitoring activities with international
partners, especially with the Bretton Woods institutions. The recently concluded agreement with
the IMF shows that the government is ready to take the necessary steps, which gives hope that thedismal development of the last year will be reversed. Tackling the cleavages within the country –especially the north-south dichotomy – remains on the agenda within this context. Therefore,
strengthening planning and implementation capacities in many ministries likewise continues to bea task, more urgently needed than ever.
In regard to security policy, aside from close cooperation within ECOWAS, a modest investment
in Ghana’s own security apparatus continues to be necessary, especially to ensure effective andeasily deployable forces, to avoid a spillover effect from regional conflicts and to increase security
on its borders. Effective security forces are also, as the Ebola crisis has shown, needed in case ofnon-military threats. The fact that Ghana has luckily been spared from any contagion this time
does not mean that without effective preparation it will be lucky the next time as well.

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