Millions of Ghanaian employees and businesses in the so-called informal sector, including operators of shops, restaurants, hair salons, schools, hotels and factories, which account for 90% of the economy, have been hit hardest by the maelstrom created by the virus worldwide.
Before Ghana registered its first two cases, President Akufo-Addo set aside the cedi equivalent of US$100 million for preparation and response plans against the spread. The decisive leadership shown was instantly appreciated and gave Ghanaians a sense of calm and assurance.
And yet, the contagion keeps getting worse and the infection rate continues to spiral, with debilitating economic ramifications.
This has meant that Ghana, West Africa’s second-largest economy – which is already facing budgetary constraints following missed revenue targets in its three most recent annual budget cycles – is hard pressed. But it still had to provide bailouts to revive its private sector, referred to as the engine of growth.
The government’s response
The government gave a 50% salary increase and tax breaks to frontline health workers as well as the three months of free water and a rebate on electricity bills to the whole nation.
Then it also offered a GHC600 million stimulus package, or rather a soft loans scheme to micro, small and medium-scale businesses. Terms of the loan: a one-year moratorium and two-year repayment period.
Good as these measures are, the sums involved in the stimulus have been far too meagre to engineer the kind of kick start that Ghanaian business requires.
The estimated beneficiaries are in excess of 300,000. And so, by a layman’s calculation, each company can get only up to GHC2,000 to revive its business and possibly attempt to pay an allowance to staff.
This is the most opportune moment for Ghana’s now resilient banking sector to lead the economic recovery agenda. But in Ghana, alas, banks seem to exist primarily to lend to the government and a few already rich folk, leaving small and medium-sized businesses to their fate and in the hands of Shylock-type moneylenders.
Financial crunch
Ghana’s financial sector admittedly has suffered a great deal of turbulence in the recent past. Many “financially unlettered” people lost colossal sums of money to the various Ponzi schemes.
Next came the closing down of some commercial banks, followed by microfinance and savings and loans companies. And then prominent fund management companies completed the series of close-downs by the central bank, all in the name of a “banking and financial sector clean-up”.
The result is that tens of thousands of citizens’ hard-earned monies are either lost or locked up in a reform that shut down all sources of financing that fuel life and enterprise.
The government eventually promised to repay all the locked-up funds in diverse forms, but hardly had any meaningful payment been made than COVID-19 reared its ugly head. Against such a backdrop, the timing of the pandemic could not be worse for Ghanaians.
Meanwhile, the banks, with their capitalisation increased from GHC120 million to GHC400 million are very reluctant to lend to the real sectors because the private sector is considered too risky.
Ghana may need a deliberate policy direction in this regard, including formalisation of a loan-to-deposit ratio.
The government could also give guarantees so the banks will have the confidence to lend to strategic sectors that are catalysts for growth in the private sector.
Until these and other realistic measures are thoughtfully implemented, the nation’s quest for growth, prosperity and transformation willl remain a mirage and the economy will remain perpetually quarantined in an intensive-care unit bereft of fiscal health personnel.
Paa Kow Manu
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