This past month, statistics released by different interest groups on the performance of Ghana’s economy - including the Bank of Ghana (BoG), Ghana Statistical Service (GSS) and the Association of Ghana Industries (AGI) - demonstrate most vividly the raging conflict between national policy managers on the one hand and wealth-creators on the other, with consumers and independent analysts caught in-between the cross-fire. The Bank of Ghana’s Monetary Policy Committee (MPC) Report released in July, which reviewed the macroeconomic performance for the first half of 2010 and the economic outlook for the rest of the year, had an intriguing assessment of business and consumer confidence among other macroeconomic performance indicators. The MPC report observed that “while overall business confidence rose by 1.2 points in June 2010, overall consumer confidence declined by 5.2 points.” And this is intriguing for two basic reasons: first, this observation seems like a flip-of-the-coin assessment of the business environment; secondly, it is diametrically contrary to the findings of the Association of Ghana Industries Business Barometer Indicator (AGI BBI) second-quarter report, which was released in the same week and which registered the lowest business confidence yet, in a year. To the first point: The prior MPC report, released in April, showed a situation opposite to that which currently prevails; business confidence was down while consumer confidence was highly optimistic. Independent political-economy think-tanks, including the Centre for Policy Analysis (CEPA), have questioned the feasibility of this reported dramatic shift in confidence within such a short period of time, especially with regard to business confidence when there has been no dramatic improvement in the major challenges that hinder business growth, including the cost of and access to credit, as well as the ever-menacing phenomenon of competition from cheap foreign imports - a situation that has now been aggravated by high utilities tariffs since June 1, which are translating into higher costs of production for various industries. Of course, BoG analysts are quick to point out that prudent monetary policy management has resulted in marked macro-economic improvements leading to a consistent downward revision of the Monetary Policy Rate (MPR) which now stands at 13.5 percent, bringing the cumulative reduction in the MPR for the year to 450 basis points. Impliedly, commercial banks’ lending rates should follow a similar trend, thereby making inexpensive credit available to businesses. This, however, has not been the case. Commercial banks’ lending rates are still at an average in the high 20 percentum range, with their spread (the difference between the interest they offer depositors and what they charge lenders) still ridiculously high. Commercial banks argue about the high risk factor of most businesses is necessitating the high lending rates. But independent analysts, including the Institute for Social Statistical and Economic Research (ISSER) and CEPA as well as industry umbrella-organisations like the AGI, are becoming vociferous in their demand for an explanation of how lending rates are arrived at by the banks. Indeed, the MPC July report observes that in June 2010 there was a general net tightening of credit to small and medium-sized enterprises and households for mortgages. Loans to small and medium-sized enterprises (SME) and households were tightened through increases in margin for riskier loans and security and collateral requirements, while large enterprises however benefitted from a marginal easing in banks’ credit stance. It makes for difficult understanding how the generality of entrepreneurs and business executives could be optimistic of the business environment when the lifeblood of enterprise, access to affordable credit, is increasingly becoming a challenge to SMEs - which form the bulk of business enterprises in the country. A tale of two economies And that leads to the second point: While the MPC indicated high optimism among the business community, the AGI BBI Q2 report showed business confidence had dipped to its lowest level in one year. That immediately raises questions about the legitimacy of the two reports; one of them definitely must be based on flawed assumptions - and that prompts the need to take a look at the samples surveyed by the two institutions as to whether they are truly representative of the Ghanaian business community, while also probing the objectives and methodologies employed in the surveys. Continuous improvement is an integral part of the proper management of the financial and economic subsystems of any dynamic nation. These improvements form both the bedrock and the oomph that enable the broader political system to meet expectations of all players in the nation - be they wealth-creators, or consumers. Empirical evidence shows such improvements are not usually on a smooth trajectory. They frequently occur at points of crisis. And like forest fires, they are painful when they occur - yet without them the forest could not survive. Crises of legitimacy – as opposed to the normal friction among policy think-tanks – emerge when only a small and particular section of the economy continues to be the beneficiaries of national policies, which in turn are primarily the outcomes of analyses by state-run policy think-tanks. This may be clearer if one juxtaposes the MPC survey and the AGI Business Barometer survey. Preliminary checks at the Bank of Ghana show that a detailed and extensive questionnaire was sent out to respondents. However, all respondents were large-scale businesses who were deliberately targetted because of the weight of their individual contributions to economic output. That in itself may not be an issue if one claims to be solely preoccupied with monetary policy, as the MPC is. However, that approach ignores the importance of employment generation and its implications for the larger economy. Yet another challenge here may be that - since Ghana’s economy is not yet dynamic enough for small and medium-sized businesses to be migrating into the ranks of large businesses within appreciably short periods of time - only the same firms will be surveyed by the MPC throughout the various periods; and if, for instance, their risk profiles with the banks are low, they stand the chance of easily accessing cheap credit, in addition to being relatively insulated against the other challenges faced by other businesses. Such firms’ outlook on the business environment is certainly bound to be different from the majority. This, perhaps, may account for the different outcomes of the two reports with regard to business confidence. The AGI BBI survey, on the other hand, had respondents comprising 20 percent in the large business classification with the other 80 percent made up of micro, small, and medium enterprises (MSMEs) - which, incidentally, is the actual structure of Ghana’s economy. The AGI BBI, unlike the MPC survey, does not ask detailed questions but about three surface questions on respondents’ perception of their enterprises’ performance over the past quarter – whether their businesses have experienced some improvement, declined, or remained the same – and what their outlook is for the next quarter with regard to those same three elements, given the current business environment in which they find themselves. Going forward Arguments can be advanced for the usefulness or otherwise of both surveys. It is becoming obvious that in any present analysis of Ghana’s economy, for any assertion made the opposite could be equally true, since two parallel economies are emerging running neck-and-neck - and government policy will therefore be weakened by its reliance on statistics and recommendations being churned out by state institutions alone, including the Bank of Ghana’s MPC and the GSS, to name a couple. Perhaps it is about time that all political-economy think-tanks - be they state, para-statal, or private sector institutions - to make public their methods of acquiring data and how they analyse them to churn out the statistics and recommendations they do, allowing for neutral assessment of their outcomes’ validity. But perhaps - even better still - it is about time key think-tanks from both the public and private sectors as well as academia all got together to iron-out the differences in their approaches to surveys of national significance so as to give government and the larger public uniform, credible and reliable statistics that we can all debate and plan with in a meaningful manner. This period could just be like one of those seasons of massive forest-fires that rage through the system, razing down all old and choked-up foliage to allow for a fresh growth of plants. Our economy could benefit from one such experience. Credit: Emmanuel KWABLAH/B&FT