African 'model state' reaches a crossroads: As the military prepares to step down, the failure of private enterprise is jeopardising a Ghanaian economic revival, writes Karl Maier in Accra

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The Independent Online
MIRACLE MIRAGE is one of the hot night spots in central Accra, where well-heeled couples dance the night away to rap, funk, and the rhythmic highlife music that is West Africa's trademark. Along with myriad outdoor cafes and well-stocked shops, posh clubs like Miracle Mirage symbolise the rise of the economy from near-collapse a decade ago.

In many ways Ghana's dramatic economic turnaround is itself a miracle mirage, pumped up with more than pounds 2bn in foreign aid and loans and administered by a military government that has been able to take painful decisions without worrying about public opinion. Western creditors argue that the rest of Africa should copy the budget-cutting and free-trade ways of Flt-Lt Jerry Rawlings' 11-year-old government. 'We need a winner in Africa, and we are all hoping that Ghana is the one,' a Western diplomat said.

Yet the revival of this country of 15 million people, with an economy the size of Bristol's, has failed so far to stimulate the vital element that could make it self-sustaining: the private sector.

Even Flt-Lt Rawlings' harshest critics acknowledge, however, that his government has made great strides in liberalising the foreign exchange market, slashing government spending and freeing up external trade. Ports and many roads have been rebuilt, electrification brought to rural areas, farmers receive better prices, the annual inflation rate is down to 11 per cent, and Ghana is current on payments on its pounds 2bn foreign debt.

'This government had the courage to embark on an economic recovery programme and see it through,' said Nana Akufo-Addo, a chief organiser of the main conservative opposition force, the New Patriotic Party (NPP). 'You must give this administration credit for laying a sound foundation for the future of the country and for bringing about a certain seriousness to the business of government.'

But as the military prepares to hand over power to a civilian government in January, following presidential elections in November and legislative polls in December, Ghana's economic drive has reached a crossroads. It still depends on traditional exports, such as gold and cocoa, for the bulk of foreign exchange earnings, and there is scant new investment, Ghanaian or foreign, except in the mining sector.

'What is lacking in the economic programme is the private sector, and the government is doing very little to support it,' said William Adda, a Secretary in Flt-Lt Rawlings' ruling Provisional National Defence Council and chairman of the State Enterprise Commission. Mr Adda's views, remarkably frank given his senior position, are echoed by Ghanaian businessmen, Western economists, and privately by World Bank officials, who publicly praise Ghana as a model for Africa.

Part of the problem seems to be Flt-Lt Rawlings himself. Upon taking power in a coup d'etat in 1981, Flt-Lt Rawlings, emulating previous military regimes, targeted private business people as agents of corruption. While he has since toned down his anti-capitalist rhetoric and has embraced the International Monetary Fund, potential investors, both domestic and foreign, remain chary.

Privatisation of nearly 200 state-owned enterprises, which still account for an estimated 60 per cent of Ghana's formal economy, has been a disappointment. The programme is moving slowly, said Mr Adda, primarily because bureaucrats, not business people, are running it. The banking sector remains largely in state hands, and there is a shortage of funds around to lend to new firms.

'Businessmen are still viewed as belonging to the criminal classes,' Mr Adda said, 'and the achievement of wealth is seen as suspicious.' For that reason, many potential Ghanaian investors have returned to trading, a time-honoured tradition in West Africa. The government's decision to liberalise trade has allowed importers to make quick profits. 'People will not make long-term investments,' Mr Adda said. 'They would rather invest in speculation.'

Today Ghana imports a wide range of goods, such as textiles, fish, and rice, which it could easily produce itself. Adam Kaleem, Northern Regional Deputy Secretary for Agriculture, said farmers cannot compete with cheap rice imports from Vietnam and other Asian countries. 'Their initiative is being killed,' he said. Overall, imports are outstripping exports by at least pounds 150m per year.

Thus far Western creditors, including the International Monetary Fund and the World Bank, have helped to cover the deficit with huge aid disbursements. But that cannot be a substitute for job-creating investments, and at some point help will begin to dry up.