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Poverty in Ghana: Reasons and Solution Strategy

Introduction

Ghana is rich in natural resources such as oil, gold, and bauxite, to name a few important industries. Partly due to this strategic advantage, the country experienced continuous economic growth at an average rate of 7 percent yearly since 2005 (Cooke, 2016). Moreover, Ghana achieved a significant reduction in overall poverty from 56.5% in 1992 to 24.2% in 2013 (Cooke, 2016). As a result, in 2010, Ghana attained the status of a lower-middle-income country according to an index developed by World Bank (2020). However, despite this fact, the poverty in the country is still overwhelming.

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Most of the country’s citizens have a daily expenditure of less than five U.S. dollars. Additionally, people in Ghana do not have access to many products that could significantly improve the quality and longevity of their lives. For instance, Adusah-Poku and Takeuchi (2019) maintain that in 2013 approximately 83% of Ghanaians were using traditional biomasses for cooking – the method that adversely affects their health condition due to air pollution. For those reasons, Ghana was placed in 138th place among 189 countries in regard to human development potential, according to United Nations Development Programme (n.d.). Therefore, although the country has achieved a lot during the last several decades, there is a huge necessity for further development.

In this regard, one may wonder what the reasons behind this condition are when a country that is rich in natural resources struggles with severe poverty. Thus, the further analysis intends to discuss the number of factors that prevent Ghana from becoming a prosperous state. They include both internal and external aspects of the country’s existence. Furthermore, the export of raw materials and agricultural commodities as the main strategy to raise the state’s economic well-being would be critically examined.

Internal Factors

The first problem that deters good economic development is the lack of mass education and good professionals. Indeed, according to the human capital framework, better knowledge among the general population is associated with higher productivity which in turn leads to a surge in earnings and reduced poverty (Abaidoo, 2021). Yet, in Ghana, 21% percent of individuals older than 15 years old are illiterate (World Bank, 2021).

Moreover, the secondary education completion rates are relatively low. For instance, while 71% of children successfully complete primary education, only 47% and 35% of kids finish lower secondary and upper secondary education accordingly (Agnes et al., 2020). Such a trend results in the low availability of knowledgeable and experienced professionals and a lack of innovative decisions. Therefore, the country cannot engage in the production of goods that necessitate skillful labor, which can bring more profit.

Another internal difficulty that negatively impacts the economic growth of Ghana is the existence of many ethnical groups that are weakly united. Debrah et al. (2016) assert that although the country enjoys stable democracy, it suffers from recurrent ethnic conflicts between various parties. Due to the existing tensions, the country is unable to develop smoothly, neither socially nor politically, nor economically. Yet again, this issue can be regarded as the lack of general education. For instance, Aikins and Ametefe (2017) note that better schooling leads to the lessening of sectorial and regional views and promotes forming of a united national interest. Thus, lack of education and lack of national identity can be named as two major internal factors that negatively affect Ghana’s economic development.

External Factors

Additionally, for country-specific reasons, there are certain external factors that lead to Ghana’s relative poverty. In this regard, firstly, it is necessary to analyze the state’s involvement in international trade. As it was mentioned above, Ghana mostly exports raw materials, which are usually quite cheap in comparison with the products that have value added to them, such as skilled labor or supplementary services. Moreover, the nation has relatively high import tariffs, which on average equals 10.34%, according to World Bank (2019). In comparison, in developed countries, this number varies from 1 to 2 percent. As a consequence, local businesses encounter increased barriers when they want to purchase capital goods that would help to reduce production costs and bring innovation.

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Secondly, although Ghana has abundant natural resources on its territory, the mining of these materials is usually conducted by foreign companies. For example, Hausermann et al. (2020) indicate that from 2013 to 2016, 50,000 Chinese arrived in Ghana to mine gold, and during the first year of active immigration owned 70% of the country’s small-scale concessions. However, Crawford and Botchwey (2017) that such ownership should be illegal as Ghanaian law states that the small-scale mining sector is reserved for the country’s citizens. Thus, the researchers conclude that such a situation appeared due to corruption among the state’s authorities. What is worse, the lack of overall control from the government has led to other instances of unlawful behaviors. They include using cheap child and women labor and irresponsible use of mercury and other chemicals that heavily damage the environment.

Moreover, it is widely known that third-world countries are usually subjects of so-called neo-colonialism, and Ghana is not an exception. As such, the Institute of Economic Affairs (2019) states that the government of the country is forced to sign oppressive and unfair contracts that largely benefit other countries. Due to such a situation, it can be argued that most of the profits from Ghana’s natural resource exploitation go to foreigners rather than to Ghanaian citizens.

Solution Strategy

From the analysis above, it is seen that in order to ensure greater economic and human development, Ghana officials should adopt a different strategy from the one they pursue now. Firstly, it is necessary to redefine the contracts that the country signs with foreign companies that exploit its natural resources. As such, the Institute of Economic Affairs (2019) notes that Iraq 2010 agreed to pay $1.90 to Exxon and Shell for each extracted barrel of oil.

As a result, the country could ensure high profits that would stay within the state and reinvest them back in the economy. Secondly, the country should reconsider its import taxes so that the capital goods can be imported at lower prices which would lead to increased production and innovation. Finally, Ghana should invest more money in education which would help the country to sophisticate its exports and earn additional income. For instance, instead of exporting cocoa beans, Ghanaians could also produce the chocolate and then sell this product at a higher price.

Conclusion

In summary, the current analysis revealed some internal and external factors that deter better economic and human development in Ghana. The former includes a lack of good education and national unity as various ethnical groups do not have a common ground for cooperation. On the other hand, the latter factors are high import tariffs, illegal ownership of mines by foreigners, and unfair natural resources exploitation contracts with international corporations. Therefore, it was concluded that not only it is crucial that the country’s authorities struggle against neo-colonialism, but also that Ghana should seek to sophisticate its production by adding skilled labor. As a result, the country would be able to enjoy higher revenues and, in turn, better economic and human development.

References

Abaidoo, A. (2021). The nexus between education and poverty reduction in Ghana from 2013 to 2017. Cogent Social Sciences, 7(1), 1-19. Web.

Adusah-Poku, F., & Takeuchi, K. (2019). Energy poverty in Ghana: Any progress so far? Renewable and Sustainable Energy Reviews, 112, 853-864. Web,

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Agnes, A., Sakshi, M., & Mayeso, Z. (2020). The 2020 MICS-EAGLE Ghana education fact sheets. UNICEF. Web.

Aikins, K. S., & Ametefe, R. (2017). Ethnic factor and politics in the Asuogyaman district of Ghana. SAGE Open, 7(3), 1-12. Web.

Cooke, E., Hague, S., & McKay, A. (2016). The Ghana poverty and inequality report: Using the 6th Ghana living standards survey. University of Sussex. Web.

Crawford, G., & Botchwey, G. (2017). Conflict, collusion and corruption in small-scale gold mining: Chinese miners and the state in Ghana. Commonwealth & Comparative Politics, 55(4), 444-470. Web.

Debrah, E., Alidu, S., & Owusu-Mensah, I. (2016). The cost of inter-ethnic conflicts in Ghana’s northern region: The case of the Nawuri-Gonja conflicts. Journal of African Conflicts and Peace Studies, 3(1), 1-27. Web.

Hausermann, H., Adomako, J., & Robles, M. (2020). Fried eggs and all-women gangs: The geopolitics of Chinese gold mining in Ghana, bodily vulnerability, and resistance. Human Geography, 13(1), 60-73. Web.

Institute of Economic Affairs. (2019). Why is Ghana so poor yet rich underneath the soil? Legislative Alert, 26(2), 1-2. Web.

United Nations Development Programme. (n.d.) Human development index (HDI). Web.

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World Bank. (2021). Literacy rate, adult total (% of people ages 15 and above) – Ghana. Web.

World Bank. (2019). Tariff rate, applied, weighted mean, all products (%). Web.

World Bank. (2020). World Bank list of economies. Web.

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StudyCorgi. "Poverty in Ghana: Reasons and Solution Strategy." January 25, 2023. https://studycorgi.com/poverty-in-ghana-reasons-and-solution-strategy/.

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StudyCorgi. (2023) 'Poverty in Ghana: Reasons and Solution Strategy'. 25 January.

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