Ghana, the west African nation known as one of the world’s largest cocoa producers, is on course for skyrocketing economic growth this year thanks to an entirely different commodity.
Ghana is “about to have an oil boom,” Imad Mesdoua, senior consultant for Africa at Control Risks, told CNBC via telephone.
“This will primarily be driven by rising oil prices, expanding production and new deals which are likely to come online in the coming six months,” Mesdoua explained.
The U.K.’s Tullow Oil and Italy’s Eni have both expanded their operations in the former British colony in recent years. Tullow started a multiyear drilling program on TEN, its second field in Ghana, in February of this year, having pumped its first oil from the site in 2016. Eni, meanwhile, began production on its Sankofa field in mid-2017.
Earlier in March, Ghana’s President Nana Akufo-Addo announced that the country’s economy was set to grow by 8.3 percent in 2018, above the 6.8 percent initially estimated in its annual budget. The figure is demonstrative of a significant economic uptick, given that the annual growth figure for two years earlier was just 3.6 percent according to Akufo-Addo, as reported by Reuters.
Ghana’s anticipated growth falls well above the World Bank’s average for the African continent. This was calculated at 3.2 percent for 2018, as released in January of this year.
Despite the impressive figures, Philip Walker, Ghana analyst at Economist Intelligence Unit, added the caveat that the non-oil segment of Ghana’s economy was seeing a “decent level of growth but not spectacular.”
Gold was Ghana’s top export product in 2016, according to the Observatory of Economic Complexity, accounting for 42 percent of the total. This was followed by cocoa, at 18 percent and then crude oil, at 9.1 percent.
Ghana’s positive economic news is supported by the country’s political backdrop.
Akufo-Addo was elected in December 2016 on an economic agenda which includes cutting corporate taxes, fighting corruption and formalizing the economy.
Mesdoua described Akufo-Addo’s “eagerness to diversify the economy” and “intent to modernize policy making.”
But despite the promising growth prospects, Ghana remains a lower middle income country. Its gross domestic product per head was $1,610 last year, according to the International Monetary Fund, below the emerging market average of $4,960.
“Ghana’s democracy is a benefit to its economy,” Walker said, but explained that “Ghana has had strong growth in the past but that hasn’t translated into jobs.” According to the Central Intelligence Agency’s 2015 estimate, unemployment in the country is 11.9 percent.
Ghana is also in the final year of a $918 million IMF aid program intended to lift growth while tackling public debt and reducing inflation.
Akufo-Addo has signaled an intention to distance his country from Western aid, speaking of the need to “move Africa away from being cap in hand and begging for aid, for charity, for handouts,” during a December press conference with French President Emmanuel Macron in the capital Accra.
While Ghana’s oil industry may be ascending, clouds could be on the horizon for its reputation as a world famous cocoa producer.
Ghana and neighboring Ivory Coast supply 60 percent of the world’s cocoa. According to Vincent Manu, country director for Ghana at the World Cocoa Foundation, the crop is worth 25-30 percent of the country’s agricultural gross domestic product and 28-30 percent of foreign exchange.
But, the industry is threatened due to urbanization in the country. “Young people are not interested because of profitability,” he added.
Climate change is also playing a role. Ghana’s cocoa production this season may be 700,000 tons, falling short of the forecast 850,000 tons due to poor rains, the head of the Ghana Cocoa Board told Reuters earlier this week.
Following the suggestion of diminished yields from Ghana and the Ivory Coast, cocoa prices hit more than one-year highs this week.