Sekondi Accra

After a closely contested election in 2008, the two primary political factions are preparing for another battle in 2012. Fringe groups in the ruling National Democratic Congress (NDC) and the opposition New Patriotic Party (NPP) may become more assertive as polls approach. The main political challenge confronting the administration of deceased President John Atta Mills was to control the party's increasingly restless rank and file, familiarly referred to as 'foot soldiers'. It was first thought that a group supporting former first lady Nana Konadu Agyeman-Rawlings and led by Raphael Cubagee would achieve sufficient backing for the presidency but John Dramani Mahama has won the most recent presidential election. Ms. Rawlings and her husband had been harsh critics of the current government. Former President Jerry John Rawlings has described the coterie surrounding Mills as "mediocre" and "greedy bastards". It will be interesting to see if the Rawlings will grasp the reigns of government not that John Atta Mills is gone.

The NDC government is being urged by the opposition and Western investors to accelerate the passage of laws governing the oil and gas sectors and to enact a Right to Information bill to increase transparency. The production of oil in commercial quantities is due to start in before the end of 2010 , with output rising to 120,000 barrels per day (bpd) of oil and 120 million cubic feet of gas within three years. In a second phase, the main Jubilee offshore field is slated to increase production to approxiately 250,000 bpd. estimates as to how much revenue Ghana can expect from this production vary widely. One local think tank, Imani, believes it could be as low as $400 million dollars a year over 15 years. Government agencies, including the Ghana National petroleum Corporation, have estimated the figure as high as $1 billion dollars annually, while some private estimates are even higher, depending on the international crude oil price.

While the oil revenue should help the government which inherited a fiscal deficit of 15% of GDP in 2009, it may not be enough to propel the economy forward at the rate required to reach the NDC's goal, which is to take Ghana in to middle income status by 2015. Finance Minister Kwabena Duffuor has rigidly adhered to the conditions agreed with the International Monetary Fund (IMF) to increase revenue and decrease government spending. These policies have also lowered the inflation rate from 20% in January 2009 to 9.4% in the third quarter of 2010. However, this has been at the expense at a rise in the cost of doing business , coupled with huge utility price hikes introduced at the beginning of August 2010 to reduce the crushing debts of utility companies.

The energy and water utilities have been struggling to restore their balance sheets. The Tema Oil Refinery's debts have been refinanced by just over $300 million dollars, but the Volta River Authority (VRA), Electricity Company of Ghana and Ghana Water Company still face financial difficulties. Revenue collection in the power subsector will have to improve greatly if Ghana is once again to become a net exporter of power. Private investors are hoping to break the VRA's power generation monopoly, and the first independent power producer, the Sunon-Asogle joint venture between Chinese and Ghanian companies, plans to supply 200 megawatts (MW) to the national grid in 2011. However, the issues of cost sharing withVRA and ensuring a reliable supply of gas from the West African Gas Pipeleine still have to be resolved.

While the gold mining industry is viable, the cocoa industry has been damaged by the loss of nearly 60 tons annually through smuggling, especially to Cote D'Ivoire. This represents an annual loss of 8.5%, and the government has introduced new producer prices for cocoa for 2010-2011 mid-crop season, aligning local prices with those paid over the border. Even if prices remain roughly equal, smugglers prefer to be paid in cash for cocoa brought by purchasing companies in Cote D'Ivoire. Ghana'a Cocoa Board continues to use an archiac check payment system, which is not widely popular because of rigidities in the banking system.

Until petroleum revenue begins to be deposited into the government's treasury, the economy will remain dependent on a combination of cocoa and gold funds as the foundation for the 8%-plus growth rates Duffuor believes are required to achieve middle-income status. Nevertheless, forecasts real GDP growth of 5% in 2010 and 10% in 2011.

The governement is contemplating a policy of hedging its petroleum purchases for 2011, although opinions vary within the NDC administration on the risks involved. The cabinet has already approved the hedging policy and CEO of the National Petroleum Authority states that it is ready to be implemented. The government needs to organize wide-ranging consultations between the primary entities in the gas and petroleum sector to advise President Mahama on a proper plan of action.

The banking sector continues to defy pressure from the government and Bank of Ghana (BoG) to lower interest rates and increase lending to small businesses that form the foundation of the economy. Prince Kofi Amoabeng, banker, who chairs the only indigenously owned company on the 2010 top-10 list compiled by the Ghana Export Promotion Council, posits that the the (BoG) should be paying interest to private banks on primary reserves , which currently stand at 9% of all cash deposits they are required to hold with the central bank. Amoabeng states that banks make provision to hold up to 5% of their cash holdings at their branches because the economy remains largely cash based. With up to 14% of their assets tied up and earning no interest, he states the banks are in no position to reduce lending interest rates from their current high levels, some as high as 33%.


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Ghana maintains an embassy in the United States at 3512 International Drive, NW, Washington, DC 20008 (tel. 202-686-4500). Its permanent mission to the United Nations is located at 19 E. 47th Street, New York, NY 10017 (tel. 212-832-1300).
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