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The hope of Ghanaian workers, traders and businesses has been dashed over harsh and deteriorating economic conditions in the country.

The record levels of high unemployment, rising cost of living, high utility tariffs, widespread despondency, and untold levels of hardship and suffering amongst the populace have left many wondering what the future holds for them.

After a turbulent 2014/2015, majority of Ghanaians were expecting this year to be much better. The expectations have not been met due to continuous economic hardships. This has undoubtedly reflected on the country’s international prospects as foreign investors are pulling money out of Ghanaian markets.

Economic Growth

For the most part of 2016, growth of the Ghanaian economy has been slow, due largely to the general lull in economic activities, tight credit conditions, and the slump in commodity prices. This is an admission from the Governor of Ghana’s Central Bank, Dr Abdul-Nashiru Issahaku who stresses that, “growth conditions remain weak and below trends."

The country’s economic growth which dipped to 3.9 per cent in 2015 is set to dip further to 3.3 per cent this year, a forecast from the International Monetary Fund (IMF) has revealed.

Fiscal deficit target missed

In spite of efforts to hold it, Ghana’s budget deficit could hit 6 per cent due to acute shortfalls in revenue among other disturbing factors.

By July 2016, revenue shortfall amounted to over GH¢2billion. The end year target of 5 per cent was reached in July with a deficit of GH¢8.3billion. By September 2016 the deficit had reached 5.9 per cent against a target of 3.9 per cent of GDP.

Economists maintain that a larger deficit implies more borrowing than budgeted for which will in turn lead to an increase in the debt level beyond the current forecast.

The higher than programmed deficit was mainly due to lower revenues arising from significant shortfalls in oil revenues, while expenditures were broadly on track.

The deficit it said was financed mainly from domestic sources, adding that the fiscal outlook hinges on strengthening revenue mobilization and sustained efforts at containing expenditures.

Economic think tanks, CEPA and ISSER that government will miss the budget deficit target.

But the Finance Ministry insists there is no cause for alarm as it is on course to meet its 2016 budget deficit to GDP ratio of 6.0 percent despite missing it in the first nine months.

Cedi stable but weak

Ghanaian importers are still reeling under the falling value of the cedi against major trading currencies, especially the US dollar. These businesses make forex loses every time they import – increasing their cost of doing business always.

The frequent fluctuation of the value of the cedi on the exchange rate market also makes it difficult for businesses to plan.

Many of them are compelled to resort to frequent price increases to make up for forex losses and/or soak up the shocks arising from fluctuations which in turn fuels inflationary pressures.

The Ghana cedi has depreciated by 5.29 per cent Year-to-Date (YTD) against the US dollar – the best performance it has recorded since 2014.On the interbank market, the local currency was trading at GH₵3.78 to a dollar at the beginning of the year but now trades at GH₵3.98 to the greenback. The American dollar is however trading at GH₵4.28 on the forex market.

The cedi’s depreciation has gone well over the prediction of some research institutions. GN Research and Ecobank Research had recently projected the cedi to trade at GH¢4.00 and between GH¢3.97 and 4.10 to a dollar respectively.

The cedi also depreciated by some 4.99 per cent YTD against the euro and now trades at GH₵4.21. It had begun the year trading at GH₵4.01 to a euro.

In contrast, the cedi appreciated by some 13.33 per cent against the pound sterling to trade at GH₵4.94 from GH₵5.70 at the beginning of the year. The appreciation of the cedi against the pound is as a result of the fall in the value of the pound after Britain exited the European Union (EU).

Collectively, the local currency has performed better than it did in 2014 and 2015. Inflows from the US$750 million Eurobond, the arrival of the US$1.8 billion cocoa syndicated loan, the US$116.2 million third tranche support from the IMF and the US$50 million USD-denominated domestic bond issuance are expected to offer some respite to the cedi before the year ends.

Inflation

In spite of efforts by managers of the economy to arrest inflation, prices of goods and services have continued to soar. Inflation averaged 17.9 per cent between January and October 2016 against an average of 9.2 per cent for the same period in 2012. Inflation now stands at 15.8 per cent (October). Meanwhile October inflation for neighboring Togo is -1.10 per cent while that of Ivory Coast is 0.6 per cent.

The high Ghana’s situation impacts negatively on incomes of Ghanaians as well as businesses. Analysis undertaken by Groupe Ndoum (GN) Research attributes the rising inflation to a mismatch between government fiscal policy and tighter monetary policy administered by the Bank of Ghana (BoG).

Interest Rates

Presently, the average lending rate in the banking industry in Ghana is about 32.4 per cent, against that of Ivory Coast which is 3.87 per cent, Togo at 3.78 per cent and Sierra Leone at 10.5 per cent.

More than 17 banks charge interest rates over and above the average lending rate with about 10 of them lending above 40 per cent per annum.

“If you live in country like that, how can businesses borrow money, invest, and make profit, so they can expand? They can’t,” says one entrepreneur.

Debt crisis deepens

Government has been adding on to the public debt stock despite worries from the country’s development partners who have expressed concerns about government’s spending spree and the worsening debt situation.

Data from the BoG indicates that Ghana’s debt was $25.6 billion (GH¢97.02 billion, per exchange rate then) at the end of 2015. By end of September 2016, the debt stock had risen to $28.3 billion (GH¢112.63 billion per current exchange rate).

Interestingly, the country’s debt to share of GDP fell from 72.9 per cent end-December 2015 to 67.4 per cent at the end of September 2015.

Worker Frustration

Labour Unions in the country have lamented the economic hardships faced by majority of workers in Ghana, saying “Ghanaian workers are impoverished as their real incomes continue to shrink under the country’s economic crisis.”

According to the Industrial and Commercial Workers Union (ICU), 60 per cent of Ghanaian workers are grappling with the increasing cost of living in the country.

The Union maintains that hikes in taxes, utilities and fuel prices among others have shot up the prices of every item on the market, making like unbearable for Ghanaians.

General Secretary of the ICU, Mr Solomon Kotei notes “the myriad of taxes that the Ghanaian worker is paying without the commensurate benefit is suffocating us; in fact there is too much pressure on workers.”

“Everything has doubled in price, however the salary of the Ghanaian worker has not doubled,” stresses Mr Kotei.

The Trades Union Congress (TUC) has recently noted that high inflation and interest rates is making it difficult for employers to expand their businesses to employ more people.

“Inflation remains very high, interest rate is abnormally high, probably the highest in the world. That doesn’t help our employers to borrow money from the banks; We live in a very abnormal economy and we are hoping that things change for us, because we are suffering as workers of Ghana,” Secretary General of the TUC, Dr Anthony Yaw Baah said.

Concerns of Business Associations

The Association of Ghana Industries (AGI), the Ghana Union of Traders Association (GUTA), the Food and Beverages Importers Association, Ghana Automobile Distributors Association (GADA), Importers and Exporters Association of Ghana have intensified calls on government to reduce the tax burden on their members.

According to them, the multiplicity of taxes continues to negatively affect the quality of lives of workers and impact business operations.

GUTA has for instance indicated its dissatisfaction with the ECOWAS Common External Tariff. According to its President, Barima Ofori Ameyaw (I) the implementation of the tariff will be inimical to the survival of businesses since the process lacked the necessary consultation.

He insists that the taxes should be withdrawn to provide welcome relief to traders.

President of the AGI, Mr James Asare Adjei has also expressed the Association’s dissatisfaction of the adverse impact of high taxes on their businesses.

“This year, businesses were subjected to new taxes without any consultations; AGI and its members are not happy with the development and have therefore engaged the Ministry of Finance on this subject matter extensively,” he stressed.

The AGI has among other things expressed its displeasure over some tax obligations expected of its members.

Notable among them is the 17.5 per cent VAT, 3 per cent VAT Flat rate as well as some port charges.

Businesses have also complained about the fact that not only have the development increased their cost of operations, the high tax regime has also made them less competitive compared to their peers across the region and around the globe.

The Association’s Business Barometer (BB) surveys for all the three quarters of this year had amongst the topmost challenges the multiplicity of taxes.

“Businesses continue to be under pressure from High cost of utility, Access to credit, and multiplicity of taxes,” the third quarter BB said.

For many entrepreneurs, starting a business in Ghana remains a major headache and a source of frustration as costs of operation keep increasing.

According to the latest Doing Business 2017 report published by the World Bank, Ghana dropped eight places to 110 in what it takes to start a business.

According to the report, “Ghana made starting a business more costly by increasing registration and authentication fees.”

Meanwhile, Sierra Leone and Rwanda were praised by the report for making it easier to start a business in those countries.

“Sierra Leone made starting a business easier by reducing registration fees; Rwanda made starting a business easier by improving the online registration one-stop shop and streamlining post-registration procedures,” the World Bank said.

The hostile business environment is worsened further as businesses are starved of much needed funds for expansion and re-tooling.

The IMF has reported that growth in credit to Ghana’s private sector declined sharply in the first half of 2016, from 33 per cent in 2015 to 9 per cent.

Banks in dire straits

Generally, the banking industry has gone through some turbulent times this year with non-performing loans very high on the books of banks.

Though some players are confident that the bad debt situation will improve by the end of the year, it is still unclear whether their belief will be real or not.

Non–performing loans (NPLs) increased by 69.4 percent from GH¢3.6 billion in July 2015 to GH¢6.1 billion in July 2016. This translated into an NPL ratio of 19.1 percent, up from 13.1 per cent in July 2015.

The industry also recorded negative 1.0 per cent profit at the end of July this year though some banks registered huge profits. From indication, the industry will record marginal profit but some banks such as Ecobank, Fidelity, GCB and Barclays are like to register huge profit based on the third quarter unaudited report.

Importantly, many market watchers are worried about the high NPLs, the liquidity situation of some banks and their stability.

Stock market

It has been far from smooth for the stock market since as many as 23 companies have lost value in their shares.

They include CAL Bank (-21.00 percent), GOIL (25.27 percent), Mechanical Lloyd (-15.79 per cent), PZ (35 per cent) and Societe Generale (22 per cent).

The market capitalization has shrank to GH¢51 billion whilst the GSE Composite Index stood at -20.27 percent at the end of trading, November 25, 2016. The GSE Financial Stock Index which measures all financial stocks listed on the Accra Bourse also stood at 24.27 percent.

Indeed, the GSE is one of the worst performing stock market this year

Aviation Sector

• Domestic players reel under high taxes, others

In spite of new state-of –the art facilities at the Kotoka International Airport (KIA) as well as regional airports across the country, players in Ghana’s domestic aviation sector continue to grapple with high operational costs.

Topmost among their challenges is high taxes, especially a 17.5 per cent Value Added Tax (VAT) imposed on domestic air fares two years ago.

The operators in August this year renewed their call on government to withdraw the tax but the call fell on deaf years.

Government’s announcement of a 25 per cent reduction in the cost of aviation

According to them, the introduction of the tax has led to a 40 per cent drop in patronage of flight services across all routes.

“The market has shrunk so much and it keeps shrinking; customers keep complaining about the fares,” lamented Chief Executive Officer of Starbow Airline, Mr James Eric Antwi.

The players have indicated that they are not getting the numbers that will make them profitable and “our airline’s cost of operations has gone up sharply because we are unable to exhaust our seating capacity.”

According to the Mr Antwi, “to grow the market, the tax should be withdrawn; we are hoping that government will listen to our pleas and remove the tax completely so we can stay in business.”