Ghana: Three sectors driving recovery

G hana suspended debt repayments and started negotiations with its domestic and international creditors in May 2023. A reform package presented by the government received the endorsement of the International Monetary Fund (IMF). Ghana’s recovery will depend on key sectors that sustain economic growth despite economic cycles. Ghana has 16 established and emerging economic sectors, which contribute to the national gross domestic product (GDP). We focus on three sectors that have exhibited resilience.

Information, Communication, and Technology ( ICT)

Data from the Ghana Statistical Services (GSS) show that the contribution of the ICT to GDP growth was 3.9 in percent in 2020, rising to 5 percent in 2023¹. Voice, data, and mobile money are engines of growth in this sector. Mobile voice traffic increased by 43.3 percent between 2017 and 2021 (from less than 10.00 percent 10 years earlier). During the same period, mobile data traffic increased by 85.2 percent. According to data from the Bank of Ghana, mobile money is growing too. The total volume of mobile money transactions increased to 5.07 billion in 2022, from 4.25 billion in 2021, representing a 19.30 percent growth².

At the end of 2016, Ghana had 8 million active mobile money accounts. This represented 24 percent of the population, up from only 350,000 in 2012³. In December 2021, the number of mobile money accounts was 48.3 million (38.4 million at the end of December 2020)⁴. Mobile money continued to increase in both volume and value of transactions⁵. Data from the Bank of Ghana shows similar growth in card payment. The number of cards issued by banks increased by 2021. Credit card issuance increased by 9.95 percent to 36,327, while prepaid and debit cards increased by 45.47 percent to 834,584 and 2.56 percent to 4.9 million in 2020 and 2021.

The Ghana Investment Promotion Center (GIPIC), says that the ICT sector experienced a 22.5 percent growth rate in 2020. But a digital divide between urban and rural areas and also between male and female continues to constrain this sector. The prospect for growth will improve further if network coverage expands to rural areas and with specific measures to close the gender gap.

Agriculture

Agriculture in Ghana is largely informal with 32 percent of the population engaged in the sector. On average, the sector has been contributing about a fifth (20 percent) to the country’s Gross Domestic Product (GDP) for over a decade. The sector grew by 6.3 percent in 2023. Crops and Livestock segments drove this performance with 6.8 percent for the two areas.

International and domestic demand continue to sustain growth in the sector. Since 2022, agriculture has suffered from the high cost and shortage of fertilizers. But high domestic demand spurred a modest growth in the sector despite low crops yields. The African Development Bank reported that the average price for fertilizer rose by 98 percent. Ghana responded by reducing its imports by 61 percent. The Russian-Ukraine conflict caused another increase in the price of global fertilizer to US$628 per ton by March 2022. The successive price hikes caused a decline in use by farmers further damping agricultural output during that period. However, agriculture is showing signs of recovery.

Ghana ranks 83rd (out of 113 nations) on the 2022 Global Food Security Index (GFSI). In West Africa, Ghana ranks first (among the 11 Western African countries) and third among the Sub-Saharan African countries on the GFSI. These achievements hold against a backdrop of galloping food inflation. In July 2023, food inflation was 55.0 percent, against non-food inflation of 33.8 percent.

Extractives

Mining

Gold, diamonds, manganese, and bauxite are the four major minerals exports. In 2021, Ghana was Africa’s top gold producer after dethroning South Africa. Foreign companies (Canadian, British, American, and Chinese) dominate the sub-sector.

The government of Ghana, holds a 10 percent, carried interest in the main active large-scale mining projects. The mining industry contributes to the government’s fiscal revenues. Revenues from the mining sector recorded 60 percent jump between 2018 and 2019 because of the increase in commodity prices. The mining industry contributed 18.12 percent of the collection of the Ghana Revenues Agency (GRA) in 2020. Gold accounted for 96 percent of the country’s mining export revenue in 2021.

Ghana’s goal is to diversify towards a local transformation of minerals such as manganese, bauxite, and lithium. For instance, Ghana’s Integrated Aluminum Development Corporation (GIADEC) plans to build a bauxite processing facility. The project is a joint venture with local smelter VALCO (Volta Aluminum Company Limited). The government is also working on plans to build accredited certified gold refinery that meets international industry and environmental standards.

Oil and gas

Authorities are bullish about oil and gas. Ghana’s first hydrocarbon discovery happened in 2007. Since then, the sub-sector has recorded a solid growth. The country has four offshore oil and gas fields. Ghana’s daily crude oil production has been declining but remains above 70,000 barrels per day. This production comes from three fields:

• The Jubilee

• The Tweneboa Enyenra

• Tano Cape Three Points Block

Data from the Ghana Statistical Service show that oil and gas generated around US$1.1 billion of revenues in 2020. In 2019, after promising discoveries, authorities⁶ announced that production could trebble in 2025. In addition, with proven reserves of over 2.3 trillion cubic feet, gas offers more prospects for the sub-sector.

Oil and gas are also a source of trade imbalance, especially in a depreciating domestic currency and rising global petroleum prices. According to the Bank of Ghana (BoG)⁷, the total import bill for refined petroleum products increased by 7.0 percent to US$14.65 billion in 2022. In January 2023, the Bank note that price increased the cost of imports of refined petroleum to US$4.7 (Compared to US$2.7 billion in 2021)⁸. In 2023, Ghana imported US$350 million of refined petroleum per month⁹.

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