24-hour economy revisited

Nearly a year ago, former president John Mahama set the otherwise dull pre-campaign season agog with his promise to transform Ghana's development fortunes with a 24-hour economy (24HE) in his possible second term.  

Almost immediately, some critics dismissed the strategy as impractical, arguing that Ghana's economy was too small to absorb any increase in output from 24-hour business operations.

Mr Mahama quieted them with the disclosure that he would chair a special inter-sectoral team to accelerate exports and open up foreign markets for Ghanaian businesses.

The critics then regrouped under the banner that Ghana already had a 24-hour economy, including some light-manufacturing firms, mining companies, pharmacies and hospitals, the police service, other government services, and chop bars (although the last is a rarity, even in big cities). Others argued that it is impossible to get all businesses to operate 24 hours.  

This, however, was a distortion of the strategy, originally proposed in Mr Mahama’s 40-year National Development Plan. It’s about more than the handful of companies that currently operate round the clock, by default, not strategy.

The 24HE, by contrast, is a purposeful strategy to utilise as much idle productive capacity as possible while strengthening existing but under-utilised capacity across all businesses, irrespective of when they operate.  

Under the strategy, the majority of businesses, particularly SMEs, will continue to operate during the day. They will receive special support to operate more efficiently, expand their operations, and create more jobs resulting in higher profits, better wages, an expanded tax base and more government revenue to finance development.

As of 2023, SMEs accounted for over 90 per cent of businesses in Ghana, about 80 per cent of employment, and 40-50 per cent of GDP, similar to their global averages.

As with their counterparts elsewhere, including advanced economies, Ghana’s SMEs tend to have lower productivity (efficiency) than their bigger cousins do.

Under the 24HE, this deficiency will be addressed through an accelerated programme to boost SMEs’ productivity under a revitalised Local Economic Development (LED) programme which will include a continuation of Mr Mahama’s Markets Modernisation Programme and a wider modernisation of the informal economy.  

A Business Climate Survey (BCS) to guide wider policies for private sector development will also be introduced.

Strategy

The minority of businesses that are expected to operate 24/7 at the upper end of the strategy will be "frontier firms," which are, ideally, bigger and capable of investing and operating on a large scale and employing more people than a typical SME would.  

They also tend to have world-class management systems and are quick to adopt technology and promote innovation. They account for a disproportionately bigger share of exports and government revenue and have the capacity to nurture SMEs and source materials from them for their operations.

As a result, even though they may make up not more than five per cent of all enterprises, these frontier firms will play a dynamic and outsized role in the 24HE, promoting both backward and forward linkages, a major source of jobs.

It must be noted that "productivity" is not the same as “production” (output), so while extending the number of hours a firm operates may increase its total production, it can only improve productivity by efficiently utilising all its productive assets, including labour, facilities, equipment and time.

Output per worker/ hour worked (as productivity is technically measured) and total factor productivity (TFP) of the other assets used must therefore rise, or the inefficiencies of the company will ultimately kill it, even if production is rising.

The government, too, must improve its productivity through comprehensive public sector reforms at the national and local levels.  A distinction must also be made between productive activities such as manufacturing and support services, such as port services or public safety for purposes of effective policy making.

The modernisation of agriculture and agro-processing forms another key feature of the 24HE. The entire value chain will be strengthened to boost food production through improved productivity (efficiency) and to supply the industrial sector with critical inputs similar to Gen. Acheampong's Operation Support Your Industry programme.

The ultimate objective of the strategy is the transformation of the Ghanaian economy from a low-value and low-productivity one to a high-performing economy with high levels of employment, household incomes and shared prosperity.

From talk to action

Implementing the 24HE strategy will not be as easy as it appears in writing, especially given the deep economic crisis currently facing the country.  
For example, investment in productive assets such as factories, equipment and infrastructure, is a precondition for economic growth.

Yet, as shown in the graph below, such investment (as a share of GDP) has declined from a decade-high of 27.0 per cent in 2015 to its lowest of 10.7 per cent in 2023, according to the Ghana Statistical Service. 

Reversing this plunge will require a surge in investment, particularly foreign direct investment on an unprecedented scale.

Other critical inaugural initiatives would be:

• A legislative and policy agenda to set the parameters for the 24HE.

• A drastic overhaul of fiscal and monetary policies to re-orient them towards employment-intensive growth, especially exports, which currently receive less than 1.0 per cent of credit from banks, compared to nearly 7.0 per cent for imports and 15.0 per cent for “commerce and finance,” the largest.

• Emergency public sector reforms, with particular focus on SOEs such as ECG, Ghana Water Company and various infrastructure ministries, departments and agencies.

• Accelerated TVET training in preparation for a surge in infrastructure development

• Restructuring of CSIR to drive Ghana’s scientific and industrial revolution 

• Mobilisation of public support for the strategy.

The writer a former DG of the National Development Planning Commission/author of the analysis for the 24HE for the Commission’s 40-Year National Development Plan.

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System Summary

24-hour economy revisited

The article "24-Hour Economy Revisited" revisits the concept of a 24-hour economy in Ghana, highlighting its potential to boost economic growth, enhance global competitiveness, and create jobs.

It discusses the infrastructure, social, and security challenges that could arise, and suggests a phased implementation approach, supported by government policies and public engagement, to successfully transition to a 24-hour economy.