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Ghana: The growing wealth gap

Summary & Comment: Ghana’s oil-driven economic expansion is transforming the country. The economy grew by 14 percent in 2011, one of the fastest rates in Africa, and much of southern Ghana has prospered. Since 2000, the economy has recorded an average growth of five percent per annum, but it shot up in 2010 when oil production began, after significant off-shore oil reserves had been discovered in 2007. The proportion of people living in poverty dropped from 51 percent in 1992 to 30 percent in 2006. However, a similar rate of growth has eluded the northern provinces. AA

Author: Correspondant Date Written: 18 June 2012
Primary Category: Economic Justice Document Origin: IRIN
Secondary Category: Western Region Source URL: http://www.irinnews.org/
Key Words: economy, Ghana, governance, income inequality

African Charter Article #22: All peoples shall have the right to their economic, social and cultural development within the common heritage of humanity . (Click for full text...)



Printable Version

Ghana: The growing wealth gap

http://www.irinnews.org/Report/95677/GHANA-The-growing-wealth-gap

Booming construction, a burgeoning middle-class, gleaming shopping malls. Ghana’s oil-driven economic expansion is transforming the country, but uneven development also means many are being outpaced and slipping further into poverty. "The economic boom, especially in Accra [the capital], is obvious, but inequalities are widening as all the prices have gone up," said Eugenie Maiga, an economist at the African Centre for Economic Transformation, a policy think-tank. The economy grew by 14 percent in 2011, one of the fastest rates in Africa, and much of southern Ghana has prospered. "The northern part of the country has clearly benefited less from the growing economy in the past 10 years than the central and southern parts," Maiga noted. "Even if rural poverty declined, the land in the north is not as fertile as in the south… the difference between the quality of houses in the north and the south of the country is obvious to see."

Since 2000, the economy has recorded an average growth of five percent per annum, but it shot up in 2010 when oil production began. Per capita income has more than tripled in from $400 in 2000 and is likely to reach $1,400 in 2012, said Samir Gadio, a West Africa analyst at Standard Chartered Bank. Boosted by oil, cocoa and gold revenues, Ghana has initiated economic reforms to spur growth and in 2011 became a middle-income country, the ninth in Africa to attain this status. Significant off-shore oil reserves were discovered in 2007.

The proportion of people living in poverty dropped from 51 percent in 1992 to 30 percent in 2006, according to the UN Development Programme (UNDP), which noted that that Ghana was the first country in the region to meet the Millennium Development Goal of halving poverty by 2015. However, a similar rate of growth has eluded the northern provinces, where there are fewer roads and less infrastructure, poorer housing and not nearly as many modern businesses as in the south. The World Bank noted in a 2011 report that while 2.5 million people in the south shook off poverty between 1992 and 2006, in the same period almost a million people in the north slipped into poverty.

Inequality is also widening in Accra, where many people from the countryside, especially the youth, come in search of jobs, but development in the capital has pushed up the cost of living and many fall further into poverty, said Maiga. Inflation, currently around nine percent, has been climbing for 14 months, weakening the currency and eroding purchasing power, while increased demand for imports drives up prices. "It is surely a good thing to see the capital booming like it is, but as far as I am concerned, life is still as tough as it was before," said Augustine, 45, a taxi driver.

The cost of food and rent has gone up across the country. "This is negatively affecting access to food in the north, where the proportion of food-insecure people is the highest in the country," the UN Food and Agriculture Organization (FAO) said in a March 2012 report. Many in the northern countryside can no longer afford basic foods. Rental prices in Accra are becoming prohibitive, with civil servants and other middle-class workers compelled to a take loan to secure a rented house. "Most [landlords] are now asking tenants to pay their rent for one or even two years in advance," said Maiga.

Roads have improved in the capital but power cuts and a steady water supply are still a problem. Sanitation services in the capital and rural areas are equally poor. Just 13 percent of Ghanaians have access to clean sanitation, according to the UN Children’s Fund (UNICEF), while 80 percent of all childhood diseases are caused by unsafe water, says NGO Water Aid. "Service provision has lagged behind growth," Razia Khan, Dubai-based West African analyst for the Standard Chartered Bank, told IRIN. " Infrastructural concerns will remain simply because the pace of growth exceeds the capacity of the authorities to put in place the necessary infrastructure."

Under the Petroleum Revenue Management Act, 70 percent of oil revenue, which contributed $444 million to the budget in 2011, must be spent on developing infrastructure and agricultural modernisation, a move that has earned praise. The government spent most of its budget on building roads and mechanising agriculture in 2011, Emma Tarrant Tayou of the Watch Revenue Institute, an extractive industries watchdog, told IRIN.

"This law is a great example of attempting to manage petroleum revenues in a way which will affect the nation’s development in a positive manner," she said, "and take into account the special attention which natural resource revenues require."

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