Growing up in the early 1980s, an aunt of mine dreaded the reading of the budget statement on radio. In my village at the time it was actually the most revered source of information on national issues. One name my aunt loved to hate was Dr. Kwesi Botchway. I grew up later to learn that he was the PNDC Secretary for Finance at the time. My aunt believed that he was a messenger of doom, because his presence on radio was synonymous to bad news. What bad news? It was the budget statement.
I realized that after each session my dad, mum and their friends would gather to talk about petroleum (especially kerosene) price hikes. I understood later that for my old folks and their friends the budget statement was simplyan announcement of petrol price hikes. Their concern was mostly on kerosene, because in our village kerosene was everything energy.I was therefore amazed later when I realized later as a student of Economics that the Budget Statement was actually a “huge” document with just a couple of pages on petrol prices.
Another thing that amazed me when I became a student of Finance and later a professional, was why a major business compass like the Budget Statement was being read two or more months into the year. Businesses are actually expected to plan their year around this policy document, and so most people or businesses that actually relied on its content always lagged behind. Perhaps, we did not appreciate the fact that this policy document should be a sacred business planning tool.
It was very refreshing when I learnt a couple of years ago that government had shifted the presentation of the Budget to November. Excellent policy shift! Thankfully, we have stayed on course to achieving this noble feat. At least government has played its part in making the tool available at the time it is needed most.It will serve some good purpose for those who have discovered that businesses do much better or can improve their bottom-line if they pay attention to where business volumes are going to be generated in Ghana during the year.
Do Ghanaian businessmen and women read the Budget Statement? If they do, what do they pick from it? Do they realize that their business for the year is all contained in the document? How will they know?
The structure of the Budget Statement makes it easy to identify what the pointers are. It divides the economy into three broad sectors:
1. Agriculture
2. Industry and
3. Services.
Each year government sets targets for each of these sectors and reviews the performance of the previous year. It is imperative to note that actuals have stayed close to targets year on year.
This means that properly crafted business plans and budgets planned around the Budget Statement can most likely mirror outcomes. Gross Domestic Product (GDP), the national cake, is expected to be shared among all economic units (individuals, businesses/firms and government). This means government revenue and expenditure plans plotted around the three growth poles are available to all. It is the smart ones who can identify where the “meat” is, that will benefit from it.
For 2012 the clear signal and direction from Government is summarized on page 68 of the 2012 Budget:
“The key focal areas of government in the Economic Sector for the medium term are: enhancing competitiveness of Ghana’s private sector, accelerating agricultural modernization and natural resource mobilization and the development of the Energy, Oil and Gas industry.
The modernization of agriculture will be accelerated to ensure its linkage with industry through the application of science and technology innovation. Government and other stakeholders will partner the private sector to enhance competitiveness by the transformation of the economy through industrialization and modernized agriculture.
The key Ministries to drive this agenda are; Food and Agriculture, Lands and Natural Resources, Trade and Industry, Tourism, Energy and Environment, Science and Technology.”
For businesses and individuals who need to plan their budgets and business strategy for the year, volumes will largely be driven by events prompted by the statement above.
In a series of articles, I will attempt to delve deeper into the micro units of each of the sectors outlined on Figure 1 and attempt also to highlight what businessmen and women, investors, individuals and all economic units who seek to make a living out of the Budget Statement, should be looking for in the 2012 Budget.