Ghana is a West African country that has made considerable progress in reducing poverty. Ghana’s poverty rate gradually lowered since the 1990’s. Poverty reduced from 52.6 percent in 1991 to 21.4 percent in 2011. Ghana slashed its poverty rate by more than half and became a middle-income country in 2011. The three reasons for this huge reduction are economic growth, diversification and education development.
Poverty Reduction in Ghana: 3 Keys to Success
- Economic Growth: Ghana’s 2017 GDP growth rate was about 8.4 percent, which was the seventh-fastest GDP growth rate in the world. The economy is developing quickly, as the country sets a few policy barriers to investment and trade in relation to other African countries in the region. Due to the few barriers, investment in natural resources such as oil and gold are common. Gold alone brings about 48 percent of the country’s revenue and is one of the main reasons for economic growth. Gold production amounted to about 590,000 ounces in 1990 and increased to 4.6 million ounces in 2018. As of 2018, Ghana is number seven in the world for gold production.
Oil is also an important export but is relatively new. The oil sector is less than 10 years old, yet is growing at a rapid rate. In 2017, more than 500 million barrels were produced from the Sankofa fields. Ghana’s growth averaged about 4 to 5 percent in the 1990’s and has gradually increased over time. Thanks to steady growth, Ghana’s poverty rate was 21 percent in 2012, which is less than half the African average of 43 percent.
- Diversification: Oil and gas are two areas that helped diversify the economy and reduce Ghana’s poverty rate by creating jobs and increasing wages for those transitioning out from low-wage occupations and into more lucrative fields. The service industry is 57 percent of GDP and remains the largest sector and another important area in Ghana’s growth. The service sector also employs about 40 percent of the population.
Agriculture still employs a little more than a quarter of the population, yet the service and manufacturing sectors have steadily grown since 1991. Developing economies are mainly agriculture-dependent economies. As a middle-income country, the amount of the population employed by Ghana’s manufacturing and service sector expresses transitioning into a developed and stable economy. In 2008, employment in agriculture was 52.5 percent and reduced to 33 percent in 2018. Service employment rose from 33 percent in 2008 to 47 percent in 2018. In only 10 years the service sector has grown 14 percent. The industry grew 4 percent during that same time period. Telecommunications and tourism are two services that helped grow the service sector.
- Focus on Education: A better educated and trained country leads to more opportunities. The number of people in Ghana’s workforce without education dropped from 41 percent in 1991 to 21 percent in 2012. Almost 90 percent of children attend school, which is a big difference from other African countries. Only 64 percent of Nigerian children attend school. Ghana spends about 8 percent of its budget on education, which is more than the United Nation’s 6 percent benchmark. For reference, the U.K. spends a little more than 6 percent on education. Ghana’s progress in education began with the U.N.’s millennium development goals that the U.N. set in 2000, and it developed at such a fast rate because it pushed for education.
Ghana’s poverty rate slashed in half thanks to education development, diversification and fast economic growth. The economy is still strong despite its 2015 recession. The economically diverse and natural resource-rich Ghana has made tremendous progress in poverty reduction and is projected to continue reducing its poverty rate in the future.
– Lucas Schmidt