Recovery plan offers opportunity in Ghana

Ghana’s response to the pandemic has been solid, limiting the contagion rate to less than 1% and administering over one million doses of vaccines. The negative effects on the economy have been moderate. While unemployment rose to 4.5%, inflation remained mostly within the target range of 8±2%. and the interest rate offered by the bank of Ghana is also down to 13.5%, increasing access to credit. However, there are signs that playing on the defensive may not be enough anymore. 

The most recent credit ratings from the Big Three, which all saw a decrease in either rating or outlook, have made the borrowing conditions for Ghana less favourable than one year ago. GDP growth has slowed from 6.5% in 2019 to 0.4% in 2020 and the government plan to modernize the economy has stalled. Moreover, in July the private sector registered a contraction for the first time in a year.   

There are however reasons to be optimistic. In the following passages, we will explore how the launch of the Ghana Enterprises Agency (GEA) and the proposed set up of a “Youth Banc” have the potential to revitalize the economy and propel the country forward. 

Ghana Enterprises Agency (GEA) 

Micro, Small, and Medium-Scale Enterprises (MSMEs) are a vital component of Ghana’s economy, employing over 80% of the workforce and contributing to around 70% of the GDP. However, due to their small size, they are very sensitive to shocks and many profitable and well-run companies are in danger due to depleting cash reserves and delays in payments.  

The Ghana Enterprises Agency (GEA), formerly National Board for Small Scale Industries (NBSSI), has been created to support MSMEs development, to enhance the regulation around the sector, avoiding the duplication of norms, and to form the next generation of entrepreneurs. 

GEA has allocated a fund of GH¢ 145 million (Grant Fund) to enable businesses to recover from the effects of the COVID-19 pandemic. The success of the scheme will be graded on the number of sustainable businesses that will survive the year and on its ability to generate players capable of competing on the continental stage.

This fund should be seen in conjunction with the Coronavirus Alleviation Programme Business Support Scheme (CAPBuSS), a government relief fund totaling GH¢750 million whose goal was to limit job loss. CAPBuSS is also a crucial step in ensuring the continuity of the Ghana Beyond Aid project, which aims to build the internal capacity of producing necessary goods and to reduce reliance on foreign aid.

GEA is also looking to modernize the legal framework around MSMEs, making it easier for businesses to know who to talk to for support and funding. GEA has started the creation of a database, mapping MSMEs from all around the country. Once completed, it promises to be a strategic tool to help tailor projects to the real environment. 

With the signing of the African Continental Free Trade Area Agreement (AfCFTA), there is an opportunity for well-funded local leaders to become continental players, leveraging the favourable regulatory framework and the uniqueness discovered by the recipients of the Grant Fund to deliver value-added services at scale.

Youth Banc

Ghana’s population is young, with 57 percent of the population under 25. Despite a decade of economic growth, Ghana faces a significant youth under-and unemployment challenge, with 13,7% of Ghanaians aged 15 to 24 currently unemployed.  

The Youth Banc is an initiative set up to finance specifically youth-led start-ups which aims at both combating unemployment and unlocking the creative potential of Ghana’s youth.

The details of the project are still not well defined, but is reasonable to expect a push towards the digitalization of the economy and the development of new forms of payments.

What the project still lacks is an incubator structure where start-ups can learn and grow. There is potential for national and international partners to enter the space and get in currently undervalued jewels. 

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