This article analyzes forms, structure, drivers and Implications of inequalities in Ghana; examines its political economy and suggests remedial policy options and challenges. Regarding economic inequalities, it shows that despite a general reduction in the incidence of income poverty, its depth has increased: with a wider income distribution gap between the poorest and richest households; marked disparities between the well-endowed South and the impoverished North; and a gendered bias in the distribution of wealth assets. Overall, the non-diversified nature of Ghana’s recent rapid growth has not boosted employment or reduced inequalities.
Ghana is known for its stability, good governance and relatively well-developed institutional capacities that support the gradual achievement of human rights. Having experienced steadily increasing economic growth of over 7% per year on average since 2005, Ghana attained lower-middle income country status in 2010. Income from offshore oil reserves discovered in 2007 began to flow in 2011, creating double-digit growth for the year. Accompanying income growth has been a rapid reduction in monetary poverty from 51.7% in 1992 to 24.2% of the population by 2013, meaning that Ghana has achieved the MDG 1 target.
The DFID-ESRC Growth Research Programme (DEGRP) produces a range of knowledge products which link the research of DEGRP to a number of research and policy debates on the following themes: agriculture; financial markets; and innovation and growth. The theme of structural transformation is the basis of much of the programme’s work; the concept involves productivity change through broad-based shifts in employment across sectors. This paper relates to the financial markets theme and draws together a number of essays that emerged from a public debate in Ghana on ‘What does it take to build a stable and efficient financial sector for sustaining growth and structural transformation in Africa?’
The lead speaker, Governor Wampah of the Central Bank of Ghana argued that by enabling greater diversification, risk sharing and investment in higher productivity activities, financial development can facilitate resource allocation and therefore, economic transformation. Efforts to develop the financial sector, according to him, should focus on enhancing depth, access, efficiency and stability. He argues that financial sector support to the real sector remains weak in many African countries, with corporate lending at the short end. There is also a lack of adequate competition, with an oligopolistic banking sector, leading to inefficient pricing of financial assets. He concluded that building a sound, stable and efficient financial sector is indispensable for sustained economic growth and structural transformation.
Many studies suggest that one of the main reasons for Africa’s dismal growth performance over most of the 20th century is its degree of ethnic fragmentation. Yet, there is still insufficient knowledge about whether ethnic diversity necessarily entails large economic costs, or whether the implications of diversity depend, inter alia, on the government’s approach toward the ethnic question. We note that economic growth tends to increase average incomes, but it also affects the income distribution. Then, if growth is accompanied by growing economic inequality, the perception of the impartiality of the government toward different ethnic groups is likely to be important for whether growth can be sustained, or whether sparks of growth will evaporate because of rising political divisions and internal conflicts. In this paper, we study whether the degree of ethnic impartiality in the government’s policies is related to the emergence of sustained growth in sub-Saharan Africa, irrespective of the actual content of the policies. We measure perceptions about the impartiality of the government with survey data from the Afrobarometer covering 20 countries starting in the late 1990 s. Our main definition of sustained growth is when there is a GDP per capita growth rate of at least 2% for at least five consecutive years. Our empirical results suggest that countries whose governments are perceived as impartial are more likely to experience sustained growth. We conclude that in order to ensure economic development, it is not only important to choose the ‘‘right” policies, but also to implement these policies in a fair manner.