On Sunday, March 15, 2020, President Nana Addo Dankwa Akufo-Addo, declared a raft of measures to combat the COVID-19 epidemic which included the closure of schools, the banning of public gatherings and the adoption of social distancing measures to slowdown the spread of the virus.
Public anxiety and uncertainty were at an all-time high as nobody seemed to have a full grasp of how the virus was transmitted or how one could even know if they were infected. To make matters worse, there was an acute shortage of basic tools for reducing exposure to the virus – hand sanitizers, tissues, and face masks.
The shortage of these basic items significantly affected an economy which was heavily reliant on imports. Industry scrambled to respond to the shortage by instituting or ramping up local production of hand sanitizers, face masks and basic pharmaceutical products.
Enthusiasm was high among the business community that finally, the nation was taking steps towards strengthening local industries and building resilience against disruptions in global supply chains. Three years on from that fateful moment, no solid foundation was built, and we are back to business as usual.
The outbreak of the Russia-Ukraine war in February 2022 catapulted the concept of economic sovereignty to the forefront of global politics. The outbreak of the war triggered conversations such as the energy security of Europe, the security of nations heavily dependent on food imports, the impact of sanctions on global trade, multipolarity versus unipolarity, and the status of the US dollar as the global reserve currency. This crisis saw many nations scrambling to find their footing. The deficiencies in developed economies were exposed as energy disruptions saw significant increases in fuel, heating, and electricity costs.
Two global shocks in three years may have revealed the weaknesses in developed countries but for a country like Ghana, these weaknesses have been present ever since the nation was conceived. For over 60 years, Ghana has been a primary commodity exporter and a net importer of finished goods.
This has left public finances very susceptible to volatile movements in commodity prices which unfortunately are controlled by other markets outside our government’s control. The prices of cocoa, gold and oil (which made up 80% of export revenues in 2022) are determined by the international markets.
Government has a huge role to play in pursuing economic sovereignty. It needs to place the national interest at the center of policymaking and rally the population towards achieving economic independence. Investments need to be made into strengthening the capacity of businesses and the citizenry to manage the critical aspects of the economy.
The government also needs to institute regulations that protects the economic and strategic interests of the nation and ensures compliance with laws that are targeted at building the nation’s ability to respond to external shocks. However, in this article I will not focus on government, as it has become an easier target for some. However, I will instead explore the opportunity that exists for the private sector, particularly businesses, to play a significant role in bringing about economic sovereignty.
Let me start off with a basic definition. Economic sovereignty refers to a nation’s ability to preserve its natural, industrial and human interests to become self-reliant and gain financial independence. It involves having adequate control over natural resources, food supply, energy production, healthcare provision, education, shelter, financial services, and logistics. Economic sovereignty does not mean that a country does not rely on other nations.
It however means that in times when other nations are unable or unwilling to support a country needs and challenges of production and consumption, that country can maintain a reasonable level of economic activity until international relations normalize. It also means that a nation can take decisions that are in the best interests of its people without fear that it will jeopardize its ability to maintain and sustain itself. For instance, China recently considered the banning of the exports of rare earth minerals. Albeit a perceived national security agenda, It can take such a decision because of the need to implement a policy of strategic autonomy, and thereby achieving economic sovereignty.
There are five general issues that a nation can address in order to achieve economic sovereignty. I have dubbed these the Pillars of Economic Sovereignty. These are natural resource preservation and sustainability, development of an industrial base, building the capacity of skilled human resources, creation of an enabling agency, and science & technology. Each of these are cursorily explained below.
The preservation and the sustainable use of natural resources is the fundamental pillar of economic sovereignty. A nation must be able to exercise ownership and control of its natural resources, decide on a plan to sustainably exploit them and allocate the benefits to its people. Any nation that does not exercise control over its natural resources cannot be said to be economically sovereign. According to Global Forest Watch, Ghana lost 20% of its tree cover from 2001 to 2021.
A 2021 study on surface water and pollution revealed that 80% of waterbodies had iron, phosphorous and pH levels far above World Health Organization (WHO) standards. Arguably, this is an indication of a nation which is unable to preserve its natural resources or to sustainably exploit them without jeopardizing the prospects for the future generation.
The private sector, and businesses in particular, need to take the initiative here to invest in sustainable and ethical practices that simultaneously generate significant revenues while ensuring that natural resources can be preserved for the next generation.
The next pillar is industry, that is to say, the infrastructure required to convert the natural resources to finished products in a sustainable, judicious and efficient manner. A country may have absolute control over its natural resources, however, without the industries to convert them to finished products, it will be dependent on other nations. For example, Ghana continues to export oil, gold, and cocoa in almost primary states because it lacks adequate industries to convert them to the corresponding valuable finished products.
In Ghana, the industrial sector has averaged about 30% of GDP since 2011, dwarfed by the service sector which accounts for 45% of GDP. There is a huge opportunity for the agricultural sector and industries down the value chain to collaborate into producing marketable items such as processed poultry, processed cassava, canned tomatoes, pasteurized fruit juice and many more to replace the imports other countries make of those items. After 60 years of being a leading exporter of cocoa, Ghana should have been a leading exporter of chocolate, cocoa beverages, and cocoa confectionaries.
This deficiency is a clear indication of a lack of diligent effort towards developing equipped industries. The private sector needs to step in and make the investments where government has fallen short. For example, the recent move by local pharmaceuticals to establish a vaccine manufacturing plant is a brilliant example of local businesses taking up the mantle from government and improving the self-sufficiency of the country in a commodity as important as vaccines. This model can be replicated across other industrial sectors and eventually lead to a country which builds its economic conversion mechanism to transform natural resources into more valuable finished goods.
Having an educated, patriotic, and innovative population is non-negotiable in building economic sovereignty. A nation that does not develop its human resource will be unable to fully realize its potential. Beyond theoretical foundations, our educational institutions need to equip students with practical skills and the entrepreneurial training that would make them employable after graduating.
Businesses also need to partner with our advanced academic institutions to provide practical training and internship opportunities to students. It is rather unfortunate that our educated minds are more valuable abroad than they are in their country of birth because of the lack of opportunities that does not make it practical for our talented minds to earn decently in country and create economic value for the nation.
Businesses have the responsibility to offer apprenticeships, on job training and internships to develop the next generation of workers capable of meeting the challenges of the 21st century. If businesses could help develop the human resource of the nation, then they will be contributing positively to the nation’s sovereignty goals.
Resources will always remain untapped without the coordination required to fully exploit them. This is why an enabling agency is crucial to economic sovereignty. It is the responsibility of regulators and the legislative bodies to formulate policies that favor and nurture indigenous businesses. As an example, China has developed policies that favor indigenous electrical vehicle (EV) manufacturers to the point that they are competing with conventional automobile manufacturers in the EV market. Ghanaian regulators and legislative body need to adopt a similar posture and seek to develop nascent industries rather than burden them with bureaucratic requirements.
Businesses, on the other hand, need to collaborate more in lobbying for these policies to be implemented. They need to understand that it is in their strategic interest to collaborate and speak with one voice about the need for policies and laws that will help create a resilient private sector that could lead to multiple sovereign economic and societal benefits, among them, tackling the perennial issue of unemployment.