For much of the past decade, the economic story of Ghana has been an overwhelmingly positive one. The country has leapfrogged past its neighbors in the region to garner one of the highest GDP-per-capita rates in Africa, while the services sector of the economy has multiplied in size several times over. Meanwhile, foreign direct investment (FDI) was at an all-time high prior to 2020, and Ghana had surpassed South Africa to become Africa's largest gold producer.
However, the rate of progress can sometimes obscure a fundamental vulnerability in the economy - the fact that Ghana is overwhelmingly reliant on commodities exports. In fact, 80% of the entire export revenues of the Ghanaian economy are derived from the export of just three commodities: cocoa, oil, and gold. Let's break down the centrality of primary commodities to the Ghanaian economy and what this might mean for the future.
Cocoa Exports: $2.9 Billion
Ghana's largest export by far is cocoa products, including beans, butter, and powder. Ghana's biggest export partner by a huge margin is Switzerland, which buys close to $1 billion worth of cocoa products from Ghana every single year.
Although the demand for cocoa has remained steady and has grown modestly over the past decade, looming supply shortages present an acute vulnerability to the Ghanaian economy. Some have predicted that cocoa will become extinct by 2050, with the years leading up to "day zero" being marked by $300 chocolate bars, as cocoa products increasingly become a top-tier luxury item.
Ghana's economy is so reliant on cocoa that the country's credit rating was dramatically downgraded by S&P last year almost immediately after cocoa prices fell on the international market. Ghana's reliance on cocoa could prove to be a serious liability in the years and decades to come.
Crude Oil Exports: $2.6 Billion
Many of the world's largest economies, from Russia to Saudi Arabia to Norway to Canada, are heavily reliant on oil exports. Ghana is no exception. The country exports more than 55,000 barrels of oil per day, making it one of the largest oil exporters in Africa (although Nigeria is the kingpin when it comes to African oil). Crude oil exporters are heavily reliant on the price of oil, which is why Ghana's outlook suffered so much when oil prices dropped last year.
However, in 2021, oil prices are rising faster than they have in years due to an unprecedented demand boom, presenting opportunities for investors as well as exporters. As a result, those looking to trade commodities on the global marketplace are attempting to capitalise, by using online brokers to speculate on the booming price of oil. Whether Ghana will see long-term benefits from the oil commodities boom remains to be seen.
Gold Exports: $2.4 Billion
Finally, there is the gold. Ghana has a massive metals mining industry but has only recently become a major gold exporter. Nowadays, the country exports hundreds of tons of gold every single year, translating to billions of dollars worth of revenue.
In times of crisis, having a large gold mining industry can be a boom, as demand for gold surges and investors look for a "safe haven" commodity to park their cash. However, in more placid economic times, a large gold sector can be a vulnerability, as deflating prices drag down GDP. For now, Ghana's gold is an asset, but this might not continue forever.
These are the commodities that drive the vast majority of Ghana's economy. As the government continues to attempt to diversify, things may change. The only question is how quickly.
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