Near Kotoka airport on the outskirts of Accra a building proudly named Millennium Heights is taking shape. It's just one of numerous construction projects under way in the Ghanaian capital, but its chosen name makes it a particularly apt symbol for Ghana's economic outlook. At present it is a rather precarious looking structure, the building's outlines blurred by a web of wooden scaffolding. Not until the builders' paraphernalia come down will people be able to see if Millennium Heights lives up to its name. The economy is subject to the same uncertainty.
The millennium year is set to be significant for Ghana. For the past 18 months, the economy has been moving towards respectability after five years of rampant inflation, sky-high interest rates and a plummeting currency.
"The last year has probably been the one that has thrown out the most positive signals," says Keli Gadzekpo, executive vice-chairman at Databank in Accra. "It may be the starting point for the regeneration of the reform programme. But the natural thing to say is that the jury's still out on whether such positive signals can be maintained."
The 1999 economic recovery programme, set in place to help secure a three-year loan from the IMF under Ghana's enhanced structural adjustment facility (ESAF), has promised real GDP growth of at least 6% and inflation below 5% by the end of 2000. Major state-owned companies such as Ghana Airways, Electricity Company of Ghana and Ghana Commercial Bank should have been privatized by the end of next year. And perhaps most significant of all, Ghana will have gone through its third democratic election since the military handed over in 1992.
According to Piet Ligtenberg, a vice-president at ABN Amro who is working in Accra as a consultant for mortgage lender Home Finance Company (HFC): "Ghana has three problems at the moment: the price of cocoa; the price of gold; and the election." World commodity prices may be out of Ghanaian hands, but the outcome and aftermath of next July's election is set to have a decisive bearing on the country's economic future. And if the previous two elections are anything to go by, it could send the nascent economic recovery crashing off the rails.
When Ghanaians first went to the polls in 1992, after nine years of military rule under Flight Lieutenant Jerry Rawlings, the economy looked in as good a shape as at any time since the country's independence from British rule in 1957. Inflation had been brought down to 10% from 123% in the early 1980s and GDP growth was in excess of 5% a year. The numbers bear comparison with those achieved in 1998, when growth was 4.8% and inflation 16%. The worrying precedent is that from a similar position, the 1992 election plunged Ghana into five years of economic chaos. Democracy wasn't the panacea that many expected it would be. As Bank of Ghana governor Kwabena Duffuor observed in a recent speech: "By mid-1997 it had become clear that the economic gains made during 1983-91 under non-constitutional rule had virtually been reversed during 1992-97 under constitutional dispensation."
According to Peter Harrold, country director of the World Bank in Ghana: "In 1992 and 1996 [Ghana's second election] the problem that undermined everything was a fiscal problem. It was government overspending financed in part by the Bank of Ghana."
The reason was simple: Rawlings' government needed votes rather than guns to remain in power, and that gave influential sectors of the electorate significant bargaining power. Wage demands from Ghana's sprawling public sector had to be met. The Bank of Ghana wrote the government cheques to cover the expenditure and inflation, interest rates and the budget deficit rocketed.
Less electoral pressure
"The government is most vulnerable when an election is coming up because people press their demands on them," says Ben Gogo, general manager at SSB Bank in Accra. "But in 1996 it didn't get to 1992 levels, and we're expecting 2000 to be even better. The pent-up feelings that were there during the military regime have eased over time."
Next year's election will also signal a decisive break with the past as it will mark the end of Rawlings' tenure of power. According to Ghana's constitution the president must step down after his second term. That, according to Stephanie Baeta Ansah, managing director of HFC, should help mollify the electorate: "Rawlings has dominated the political scene for 19 years," she says. "Next year there has got to be a change and so there will be nobody needing to perpetuate themselves. The element of blackmail will not be so obvious."
Others are less confident. One Ghanaian businessman, who wishes to remain anonymous, suggests that rather than pacifying the electorate the end of Rawlings' regime may lead to the resurfacing of old feuds as people see the chance to settle scores dating from the era of military rule. Rawlings' government has failed to effect a South African-style reconciliation process. "A lot of bad blood remains," he says. "Everything points to retribution of justice. The only way to postpone that is if the sitting government wins the election. They're getting jittery and are going to spend money."
Harrold at the World Bank agrees that there's no guarantee that Ghana will this time be able to capitalize on firm macroeconomic foundations. But he sees a number of reasons to be more optimistic than in the past.
For one thing, the government has already published fiscal targets for next year, so any attempt to spend its way to an election victory will be transparently obvious. The opposition party is also more vocal and influential than at any point in the past decade, and it will be itching for the opportunity to make economic mismanagement one of the key election battlegrounds.
"The government does not want to go into this election with a rising inflation trend," suggests Harrold. "They recognize that the best fundamental chance they have of re-election is reasonable growth combined with noticeably lower inflation."
A steadfast central bank