One of the first things you learn about the social sciences is that politics and economics are eternally linked at the hip. Each affects the other, and so the job of great leaders is to find that ever-elusive delicate balance. In my first try of the year, I predicted that inflation would race like a racehorse out of the stables this particular pre-election year, as many sound economic decisions will be sacrificed on the altar of political aspirations. Such behavior usually comes at a price – in our case, much higher prices. This was not an Einstein-like prediction, it was a natural consequence predicted by some leading economists and organizations like the World Bank. Not all opinions are weaponized for a program; it’s just good old data-driven analysis.
As we have seen lately, exogenous variables have further exacerbated cost centers and disrupted business models. Many things are now beyond our control, but those things within us should be intelligently questioned. For example, while it is good to champion the gospel of exports to encourage a positive balance of trade, have we really considered the bureaucracy and high costs of navigating the customs playbook? We are lyrical about creating enough to meet local consumption, but have we considered the erratic power supply to be responsible for manufacturers having alternative energy costs of up to half their overhead ? This inability of local producers to compete favorably is one of the reasons why imports are ready substitutes. If someone relying on off-grid power solutions charges a little more to cover the increased costs, is there something wrong with that? If insecurity or transport problems cause people to transfer part of this cost to final consumers, is this irrational?
It is interesting that at the beginning of this year we saw the need for eliminate electricity subsidies have “prices reflecting the market”. Understand to emphasize that electricity is an essential service, yet we have justified the need for the companies that manage our electricity to remain in operation by increasing tariffs. We agreed that due to the desperate depreciation of the naira against currencies like the dollar and the pound, more money was needed to replace critical infrastructure like the railway tracks that were destroyed. To emphasize, we can safely assume that transportation is an essential service, especially when provided by the public sector. Yet we are suing private companies such as those that provide non-essential services like pay TV to freeze prices. Note that these organizations provide what economists call luxuries, which means that if people can’t afford or take advantage of these public services, they’ll be weary. It’s not by force.
Do policy makers really understand how these business models work or are we just grandstanding? Are we leaning towards populist policies that offer people placebos instead of concrete solutions? These guys buy very expensive broadcast rights in foreign (and very stable) currencies only to charge a service fee in an unstable currency. So whenever the naira depreciates as it has been showing lately, they are effectively losing revenue while providing the same service at fixed prices. Not to mention that they are also exposed to the vagaries of the national economy in which they operate – such as rising diesel costs etc. As touted as the pay-per-view model is, many don’t know how it actually works economically, or that the technology infrastructure (the two-way communication between a subscriber’s set-top box and the service provider’s headend services) which currently does not exist on an industrial scale.
Another dubious practice is that when regulators are also players in the same industry, it almost never bodes well because more often than not they will use policies to bring competition down to the level of their incompetence, rather than elevate themselves at the level of best practices. .
Many young people struggle to pay rent in urban centres. The owners, in their defense, use expensive cement and other building materials as an alibi. So, are we also going to legislate on rents? We cannot, in the same economy, create unholy monopolies for some companies that are reckless with their pricing, and then turn around to control other companies that offer multiple choices to customers. Should companies sing kumbaya and wish these operational costs were gone? Whose fault is it ? In economics, the laws of supply and demand are linked to price elasticity. If prices are higher, demand for a normal good will fall. What exactly are the parameters of our decision-making?
You can Banku on it
Putting aside the disgraceful loss of the Jollof Derby, can we stop and examine why Ghana’s economy is eat well? The superpower of investors is the ability to predict or anticipate economic outcomes with some degree of certainty. Do we believe that the ease of doing business begins and ends with the ability to register a business name within days? Our foreign direct investment has decreased over the years and one of the drivers of this apathy is the anyway of our regulators and political flip-flops. Local and foreign entrepreneurs need to be convinced that a political orientation is something they can bring to the bank.
Much of our room for maneuver is taken up by the huge size of our market, but smaller economies like Ghana’s thrive on doubling down on innovation, having a relatively stable political climate, social development and ease of to do business. From Twitter set up its first African base in Ghana, a litany of investors and companies have settled there because its political gatekeepers know how to talk to investors in the language they understand. Its currency has also been relatively stable – you can see this in the cautious nature with which monetary and fiscal policies are managed.
It was sherlock holmes it says, “I can’t make bricks without clay.” We cannot, in the 21st century, afford to make critical decisions that are not backed by credible data for the sole purpose of appearing in the good books of voters. One of the challenges we face is an ingrained institutional apathy for credible data – which is why we cannot say categorically how much crude oil we export daily. It’s been hard to get something as basic as an actual train passenger manifest. It is a Herculean task to tell how much is generated at a toll plaza. The major institutions that manage our collective wealth will go on for years unaudited and even our national population numbers are a glorified guess sprinkled with educated guesses from multilateral organizations.
Luckily for us as a collective, the pandemic hasn’t done as much damage as expected in some quarters, but I dare say the post-pandemic world is going to be brutal as the global economy prioritizes its strategic interests . So if we don’t get our ducks in a row, they’ll look elsewhere and leave us behind. We should take this into account as the global business centers of Abu Dhabi, Berlin, Johannesburg, Kigali, London, New York, Paris, Shanghai, Singapore, Tokyo, etc., are eyeing investment-friendly destinations as the world reopens completely for trade. Responding to unscientific feelings can be dangerous because the road to hell is usually paved with good intentions.
Speaking of Albert Einstein, it is noted that he said that we cannot solve our problems with the same thought, awareness and mentality that we used when we created them.