From Makola to market: Culture, economy

Ghana's economic path has been deeply influenced by its colonial past, the impacts of the transatlantic slave trade and a transition from a subsistence economy to one focused on exporting cash crops and raw materials. 

Post-independence, the country pursued industrialisation and economic diversification, but these efforts have been hampered by a dependency on exports such as cocoa, gold and oil, making it susceptible to global market fluctuations.

This reliance has stunted sustainable growth despite occasional booms. In early 2024, Ghana’s GDP saw a significant rise, driven by the industrial sector, particularly oil and gas, while agriculture and services also showed improvement.

However, inflation remains a concern, with a slow reduction impacted by rising food costs and currency depreciation. The fiscal landscape has seen some stability with efforts in debt restructuring and solid banking sector performance, though challenges remain.

This historical backdrop, steeped in colonial legacies, continues to influence Ghana’s economic strategies.

The reliance on raw material exports, while beneficial in the short term, has not fostered a diversified or sustainable economic foundation, reflecting broader colonial impacts and the ongoing struggle for a self-reliant economy.

Rreflections culture

The informal sector is a vibrant part of Ghana’s economy, encompassing a diverse range of activities from trading to craftsmanship.

This sector has expanded as a response to the inadequate formal job creation by the state, serving as a crucial survival mechanism for many. However, its prominence also underlines the deficiencies in the formal sector.

Historical distrust in state institutions has cultivated a culture of self-reliance, leading many to operate outside formal economic structures, avoiding taxes and regulations. This cultural trait poses significant challenges for integrating this sector into the formal economy, despite it employing the majority of the workforce.

The informal economy is not only a vital source of employment but also acts as a buffer against the economic fluctuations that affect the formal sectors.

It includes a wide range of unregulated economic activities, from street vending to small-scale manufacturing, which often escape the purview of official economic analysis and government regulation.

This sector's resilience is noteworthy, particularly in times of economic downturn, when formal jobs become scarce and the state's ability to support vulnerable populations diminishes. Yet, this resilience comes at a cost.

The lack of formal recognition and regulation leaves workers vulnerable to exploitation and devoid of legal protections and benefits such as health insurance and pensions, that are commonplace in the formal economy.

Integrating these workers into the formal sector and extending them these protections remains a formidable challenge, necessitating innovative policy solutions that respect their unique circumstances and contributions to the Ghanaian economy.

Empowering local communities

Decentralisation is pivotal in the proposed economic reforms, aiming to transfer more power to local governments. This strategy could enhance governance, accountability and resource allocation, allowing local entities to better tackle community-specific challenges.

By improving local governance, resources can be more effectively distributed, reducing the inefficiencies of centralisation which often leads to corruption.

Empowering local governments enables them to manage budgets and taxes more effectively and address the deep structural barriers that hinder national development.

This approach fosters stronger local economies and ensures that decision-making is closer to the people, enhancing transparency and reducing opportunities for mismanagement.

Cultural shift

For Ghana to achieve sustainable growth, it must tackle both cultural and structural barriers. The informal sector needs to be integrated into the formal economy, necessitating a shift in the public's perception of state institutions.

The government must prove its effectiveness in delivering tangible benefits such as infrastructure and services to foster trust and encourage formal economic participation. 

Decentralisation is essential for this transformation, enhancing local government capabilities to foster participation in the formal economy and reduce corruption.

By addressing the intertwined issues of debt management, tax reform and cultural resistance to formalisation, Ghana can progress towards a more robust and inclusive economy.

However, without these critical changes, the nation risks remaining in a cycle of underdevelopment and instability.

The writer is a Research Fellow, 
Southern Cross University.