Time to reframe Ghana’s economic problems

The problem with Ghana’s economy is the heavy reliance on primary commodities and less developed manufacturing and service sectors; what many call the Guggisberg economy. 

Standard interventions for addressing this challenge have included investing in processing and manufacturing to add value to raw materials, boosting agricultural productivity, training the workforce to meet the needs of the manufacturing sector and investing in roads, ports and energy to facilitate trade and economic activity.

Yet, the Guggisberg economy persists. So, what next?

The owner of an office building installed mirrors next to an elevator(!) to deal with complaints about its slowness.

This story is often used to illustrate the need for and value of reframing problems.

The mirrors are not a solution to the original problem.

They don’t make the elevator faster.

Instead, they offer a different understanding of the problem.

People lose track of time when they can look at themselves in a mirror! Perhaps, it is time we reframe the Guggisberg economy for a different understanding and appreciation of how to deal with the challenge.  

In the writer’s experience, access to finance problems in business has been better addressed when reframed as access to market challenges.

Financiers appreciate clients with a clear understanding of their customers (unique needs, ability to pay, etc.) and a corresponding value proposition. 

Similarly, poor adoption of productivity technology (e.g., improved seeds) by small-scale farmers has been overcome when the challenge is reframed as risk aversion (reluctance to invest) rather than an solution to invest (cost of inputs).

The solution involves bundling the right complement of technology with risk-mitigating measures along with “guaranteed” output market access.

Root cause analysis (RCA), a process of discovering the root causes of problems to identify appropriate solutions, may be used to reframe the Guggisberg economy.

Under the RCA lens, the Guggisberg economy is, essentially, rent-seeking. 

This implies that an individual or an entity seeks to increase their own wealth without creating any benefits or wealth to society by, e.g., manipulating the distribution of economic resources.

This reduces economic efficiency with an attendant rise in income inequality, lost government revenues, a decrease in competition, etc.

This was the essence of colonialism! The bane of the Guggisberg economy is, therefore, the tendency to extract wealth without creating any benefits or wealth to society, not simply the overreliance on raw material exports.

Economy

The Guggisberg economy persists because simply transforming natural resources into manufactured products doesn’t really change much when the underlying model remains rent-seeking.

Processing and manufacturing don’t always add value! 

Fresh tomatoes are higher value products than canned tomatoes, from both a consumer’s perspective and arithmetically.

What Ghana needs is an alternative economic model.

That may be the value creation model (not to be confused with the value addition mantra).

The essence of business is an exchange of value: creating value for others and finding value in return! 

A business model describes how a business creates, delivers and captures value.

At the centre of the model is the concept of value proposition, the unique set of benefits or value that a product, service or brand promises to deliver to its customers.

How does Ghana create value? What is her value proposition?  

Value, ultimately, is defined by customers, investors, and other stakeholders.

Real wealth is created sustainably by making and delivering what consumers want and are willing to pay for.

Failure to appreciate this principle, partly, accounts for Ghana’s imported food bill.

There is a growing disconnect between what urban consumers demand and what farmers produce.

Domestic agriculture now feeds mainly the rural population and delivers eventual booms driven by export demand (cocoa, cashews, pineapples, bananas, etc.).

Reconnecting farmers and domestic consumers through demand-driven value chains that meet consumer demand in both quantity and quality should be part of the agriculture initiatives the current government plans to roll out.

The writer is a specialist in market systems development (MSD), the development of the country’s agricultural markets, private sector (including exports) development and the development of lagging regions.

E-mail: augustineadongo@ibcghana.com or augustineadongo@gmail.com.