Ghana must build nation, not SWF

Consider this "jam today, jam tomorrow" dilemma: should a country sacrifice now in order to build the infrastructure needed for future growth or should it concentrate on trying to make life better for its people?

For poor countries this is a troubling question because money spent on roads and power generators could instead go towards alleviating the desperate poverty that many of its citizens suffer. Most African countries seem to have come down on the side of spending now and there are understandable moral reasons for doing so when so many people are starving or sick.

But what use is a hospital, for example, if there is no power? Why build an expensive medical facility when many diseases could be eradicated in the future if there was a proper sewage or drinking water system. As the Chinese say: give a man a fish and he is fed for a day, teach him to fish and he will feed himself for life. African governments need to stop applying sticking plasters to problems and instead create an environment that will sustain long-term growth.

One of the countries that has an opportunity to do so is Ghana in West Africa. Ghana has a robust agricultural sector (cocoa is a big export) and also a thriving mining industry – it is the world's ninth largest producer of gold, for example.

Even more importantly, Ghana has a functioning democracy and its people are friendly and open.

The country's foundations are, therefore, solid and the opportunity to build a prosperous nation may be just around the corner as oil begins pumping from an offshore field called Jubilee later this year.

Initial production will be about 120,000 barrels a day and will rise to 250,000 barrels in a couple of years.

The International Monetary Fund has predicted that Ghana's economic growth rate will rise from seven per cent this year to at least 15 per cent in 2011.

Jubilee has reserves of up to 1.2 billion barrels and should generate at least $1 billion (Dh3.67bn) a year in new revenues for decades to come.

But what should Ghana do with its oil windfall?

The first thing to do is ensure that it does not get siphoned off into the Swiss bank accounts of the country's elite. Other West African states that have struck oil have found the experience more of a curse than benefit as it has bred corruption, resentment and violence. The international community needs to support Ghana's political leaders and encourage them to put country before personal gain.

But how best to spend the money itself? An additional $1bn a year would make a meaningful difference to the living conditions of Ghana's poor but the country's leaders need to concentrate on the future rather than ineffectually trying to tackle current problems. That is a hard thing to propose when Ghanaian children are being washed in plastic buckets at the side of the street but the only way of ensuring that future generations do not live in similar conditions is to invest in infrastructure now.

That means a better airport and sea port, properly paved and maintained roads linking every town in the country, a countrywide mobile-phone network, fibre optic cables into every town for broadband internet, a robust electricity system and proper sewage facilities. All boring but as cities such as Dubai have shown, if you have the infrastructure, economic growth will follow.

Ghana's plan at the moment is to split its oil revenues between the national current account, a stabilisation fund and a sovereign wealth fund. The SWF will invest in overseas assets to provide an income once the oil runs out, the stabilisation fund will smooth out dips and peaks in the oil price and the immediate spending money will help cut the country's budget deficit.

Given Ghana's needs, I think, the creation of a SWF is a waste of time and it should not divert oil money into the current account. The best way of improving living conditions for ordinary Ghanaians is to build a functioning country. That is the only way to ensure businesses thrive and an internal engine of growth capable of sustaining long-term prosperity is created.

Ghana was the first sub-Saharan country to gain independence and I hope that spirit will help it become the first African country to use mineral resources to escape crushing poverty.

- The writer is the Business Correspondent of The Times of London. The views expressed here are his own

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