3 Feb 2012
Ghana's infrastructure potential
|Opportunities with risks.|
The government itself is reportedly expecting Ghana to need an estimated US$1.6 billion annually to meet infrastructure needs over the next 10 years, with oil and gas revenues pushing the country into double-digit GDP growth.
In late December, the government announced the country's GDP had expanded by a record 13.6% last year, almost double the 7.1% posted in 2010, with much of this growth generated by the energy sector.
Ghana's prospects for 2012 are said to be equally bright, although analysts believe much needs to be done to reduce unemployment and spread the benefits of economic expansion.
There may be some question too over the procurement and planning inherent in the country's surge. Last month, Ghana's US$1.2 billion gas processing plant bankrolled by China's oil and petrochemical giant Sinopec and China Development Bank was re-located for technical reasons, according to a senior official at the company overseeing the project, Ghana Gas.
The plant was due for completion by the end of this year but it's unknown whether that deadline will still be met.
More generally, BMI said it holds a bullish outlook on Ghana's macroeconomic prospects. The country's objective of securing a middle income level by 2015 (predicated on successful oil windfall management) suggests that Ghana is likely to outperform other markets in the region.
BMI reported that the presence of UK banking group Barclays Capital in a multibillion dollar project financing arrangement for a large housing scheme "highlights the attractiveness of the market and sets a precedent for large-scale project finance schemes."
Ghana's business environment received a positive rating from BMI, which quoted its "level of institutional quality and market orientation" to suggest the country would be an outperformer in Africa and the Middle East.
"However, risks loom, most notably the 'oil curse' trap, which has been responsible for the decay in governance and stability in several oil-rich West African markets, most notably Nigeria and Angola." BMI's report said.
"Historically, volatility in real growth has been high and consequently downside and upside risks" were present in the forecast.
Oil windfalls and new 'greenfield' projects presented upside risks while delays in implementation were the primary downside risks, said BMI.
Indeed, income from the oil industry grew strongly in 2011, helping to drive the contribution of the mining and quarrying sector to GDP from about 5% in 2010 to an estimated 5.2% in November last year, according to official figures.
However, this was offset by a decline in the contribution of other sectors, notably manufacturing and agriculture, the latter of which expanded by 2.8%, well under the overall total.
The rate of GDP expansion is expected to slow in 2012, but the projected growth of 9.8% will still be one of the strongest worldwide, some analysts say. However, the spectre of recession that hangs over much of Europe and forecasts of a slowdown in some Asian economies could impact Ghana's progress.
The economy has been helped by a steady inflation rate but it could move back into double-digit inflation in 2012 if, as the government has suggested, there is no reduction in the rate of fuel subsidies. In 2011, price support for fuel cost the state almost US$230 million.
Some analysts have also suggested that inflation could be fuelled ahead of parliamentary and presidential elections scheduled for late 2012, with additional political considerations.
But as long as Ghana is able to sustain its expansion through this period of investment, the country could be well placed to reap the benefits of its energy boom, which in turn should support further broadening of the economy.
from Ali Fakha, Dubai Office
(Image courtesy of ©iStockphoto.com/samburt)
|Business Monitor International (BMI)||Tel: (44) 20-7248-0468
Fax: (44) 20-7248-0467
|China Development Bank||Tel: (86) 10-6830-6688
Fax: (86) 10-6830-6699
|Sinopec||Tel: (86) 10-5996-0114
Fax: (86) 10-5976-0111