Re-positioning Ghana’s economy for development and growth: the role of natural resources (crude oil)
The Ghanaian economy is endowed with diverse forms of natural resources including forests; and minerals such as gold, diamond, bauxite, manganese, and crude oil. Ghana ranks very high among West African countries endowed with natural resources.
Components of Sectors of the Ghanaian Economy
Generally, Ghana’s domestic economy revolves around three (3) major sectors. These include Agricultural, Industrial and Services sectors. Each of these sectors is briefly explained in the following section. Explanations in this section are based on categorisations outlined by Ghana’s Ministry of Finance and Economic Planning, and Ghana Statistical Service (GSS).
Agricultural sector: This comprises crops such as cocoa and cashew; livestock; forestry and logging; and fishing, among others.
Industrial sector: This includes mining and quarrying such as gold, diamond, bauxite, manganese and crude oil; manufacturing; electricity; water and sewerage; and construction, among others.
Services sector: This comprises trade; repair of vehicles; household goods; hotels and restaurants; transport and storage; information and communication; financial and insurance activities; real estate; professional, administrative and support services activities; public administration and defence; social security; education; health and social work; community, social and personal services activities.
Contributions of each sector to the overall gross domestic product (GDP) over a five-year period are presented in the table below. Data contained in the table were obtained from the Ghana Statistical Service.
Sector Contribution to GDP 2015 2014 2013 2012 2011
Agricultural sector 19.0% 21.5% 22.0% 23.0% 25.5%
Industrial sector 26.9% 26.6% 28.5% 28.6% 25.6%
Services sector 54.1% 51.9% 49.5% 48.4% 49.1%
Available data on the various sectors’ contribution to Ghana’s GDP during the five years under review revealed forestry and logging remained the largest activity in the agricultural sector in 2014, it accounted for 16.5% of agriculture’s total contribution to GDP in 2014. In 2013 and 2014, crude oil production and its related activities recorded the highest growths of 18.0% and 18.2% respectively in the industrial sector. Financial intermediation was the largest activity in the services sector in 2014, it accounted for 20.7% of the services sector’s contribution to GDP in 2014.
The level of growth recorded by each sector of the Ghanaian economy between 2011 and 2015, and released by the Ghana Statistical Service is presented in the following table. Data in the table reveal a significant growth rate in the industrial sector in 2011. Dominance of the industrial sector in terms of contribution to overall GDP in 2011 could be attributed to the discovery of crude oil in commercial quantities in that year. Subsequent growth rates recorded in the industrial sector were far below the 41.1% recorded in 2011. The services sector has witnessed dwindling or unstable growth rates from 2011 to 2015. Growth rates in the agricultural sector over the five-year period are relatively low. Lowest growth rates in the agricultural sector were recorded in 2011 (0.8%) and 2015 (0.04%). Perhaps, the “uninspiring” growth rates affirm the lamentations or concerns of some economic and non-economic experts that the sector has been neglected by Ghanaian governments over the years.
Sector Growth Rate 2015 2014 2013 2012 2011
Agricultural sector 0.04% 5.3% 5.2% 2.3% 0.8%
Industrial sector 9.1% 4.6% 7.3% 11.0% 41.1%
Services sector 4.7% 4.6% 8.9% 11.0% 8.3%
Ghana’s annual real GDP growth rates over the five-year period were: 2011 = 14.0%; 2012 = 9.3%; 2013 = 7.3%; 2014 = 4.0%; and 2015 = 4.1%. The computations revealed average annual real GDP growth over the five-year period (2011 – 2015) was 7.74%.
The average sector contribution to Ghana’s GDP (2011-2015) was: agricultural sector = 22.2%; industrial sector = 27.24%; and services sector = 50.6%. The average sector growth rate between 2011 and 2015 was: agricultural sector = 2.73%; industrial sector = 14.62%; and services sector = 7.5%.
Crude Oil
Crude oil is one of the valuable natural resources likely to be discovered in an economy. Its discovery and ownership within a given geographic territory minimise the effect of economic burden on the implied country and its citizenry. This natural endowment was discovered in commercial quantities decades ago, and led to the formation of Organisation of the Petroleum Exporting Countries (OPEC).
Founding Members of OPEC in 1960 are the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Later Members of OPEC include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), and Angola (2007).
OPEC Membership (Exit and Re-entry)
Some notable members of OPEC have experienced unstable membership over the years. The exercise of democratic rights, such as freedom of association, resulted in some OPEC Members exiting the organisation and rejoining at later dates.
Ecuador: Suspended her membership from December 1992 to October 2007.
Indonesia: Suspended her membership in January 2009 and rejoined in January 2016
Gabon: Terminated her membership in January 1995 and reactivated in July 2016.
Associate Members: These are nations that do not qualify for full membership, but under the statutes of OPEC are admitted under such special conditions as may be prescribed by the Conference.
Currently, OPEC has fourteen (14) official members. Though Ghana, La Cote d’Ivoire and other African countries produce crude oil in commercial quantities, they are yet to become official members of OPEC. Although the afore-mentioned countries are not yet official members of OPEC, they are believed to be flying on the economic price wings of OPEC. That is, they benefit from petroleum prices determined by OPEC Member countries.
Ordinarily, and from economic perspective, more crude oil discovery in new economic territories means more crude oil supply into the oil market, vice versa. Basic demand and supply principle tells us all else held constant, excess supply over demand is more likely than not, to result in downward review of price per barrel of crude oil.
Author: Ebenezer M. Ashley (PhD)
Dean / Senior Lecturer
Regent Univ. College of Science and Technology
Consultant
Eben Consultancy
Email: deansbl@regentghana.net; ebenezer.ashley@gmail.com
Website: www.ebenezerashley.com
