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November 12, 2020

Africa

GHANA: The state of the race

BY Malte Liewerscheidt

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( 4 mins)
  • President Nana Akufo-Addo and his New Patriotic Party (NPP) remain the frontrunners in presidential and parliamentary elections scheduled for 7 December.
  • If defeated, the opposition National Democratic Congress (NDC) of John Mahama may challenge the results in court, which would spell months of uncertainty.
  • While the government appears increasingly cash-strapped in the wake of the Covid-19 pandemic, future borrowing plans indicate that belt-tightening will not top the agenda.


As analyzed previously, it had been Akufo-Addo’s election to lose before the pandemic hit. Ever since, the administration’s swift crisis management has proven popular and has left little room for the opposition to thrive on government mistakes. As such, Mahama’s somewhat uninspired campaign appears to have failed to gain much traction, while Akufo-Addo plays out the advantages of incumbency. The few somewhat reliable opinion polls available seem to support this view.

Nevertheless, the race is likely to be tighter than in 2016, when Akufo-Addo scored 53.7% of the vote against Mahama’s 44.5%, as winning margins have historically been much narrower. This may encourage Mahama, should he lose, to challenge the results in court on the grounds of voter fraud and irregularities. In fact, the opposition has already unsuccessfully challenged the electoral commission’s controversial decision to compile an entirely new voters register, rather than simply updating the existing one. As feared by the NPP, the registration exercise primarily boosted the number of registered voters in NDC strongholds.

Ever since, Mahama has repeatedly pointed to irregularities and shortcomings in the organization of the vote, potentially laying the groundwork for a future legal challenge. Such an outcome would not be unprecedented: in 2012, then-challenger Akufo-Addo went to court levelling similar allegations after having lost with 47.7% of votes cast against the incumbent Mahama’s 50.7%. Back then, it took the Supreme Court nine months to eventually dismiss the challenge. While Mahama’s government continued to rule following the vote, the court case cast a shadow of uncertainty on Ghana’s political trajectory, putting major investment decisions on hold.

Banking on a speedy recovery to rein in the deficit

Meanwhile, the administration appears to be increasingly struggling to manage the fiscal fall-out caused by the pandemic. According to the latest World Bank estimates, the 2020 deficit will come in at 14.5% of GDP, against a mid-year government projection of 11.4% (and an already ambitious original target of 4.7%). The debt-to-GDP ratio is expected to surge from 63.9% to 71.6% this year.

Against this background, several projects suggest that the government is increasingly cash-strapped: most prominently, this concerns plans to mortgage future gold royalties by selling a 49% stake in a government-owned special purpose vehicle (‘Agyapa’) to private investors for USD 500mn. The project, which had been fast-tracked but then put on hold due to severe legal concerns by the Special Prosecutor, has been heavily criticized for grossly underestimating the value of future royalties accruing to Agyapa and, by extension, the share private investors would be entitled to. According to the Natural Resource Governance Institute, the company could receive royalties amounting to USD 150-200mn per annum under an open-ended contract.

Furthermore, another state-owned entity, the Ghana Education Trust Fund (GETFund), sold a local currency bond worth USD 223mn at 21% interest in October, mortgaging future revenues accruing via a 1.5% excise duty at rather unfavorable conditions. Meanwhile, the grace period on the first tranche of the USD 2bn SinoHydrofacility, supposed to be repaid with future bauxite and alumina exports, will expire in 2021. Still weighing on the public purse, not a single power company has been convinced to abandon take-or-pay terms agreed under the previous government. In mid-2019, the government had declared that it would prioritize the renegotiation of these terms, which apparently cost USD 500-600mn per annum.

However, rather than prioritizing fiscal consolidation post-election, indicative borrowing plans suggest that the administration is primarily banking on a speedy economic recovery. In fact, the IMF expects GDP growth to average at 5.2% over the next three years, against the 0.9% projection for 2020 (but still below pre-pandemic levels). Projections in the budget guidelines published mid-year suggest that the deficit will remain above the 5% ceiling mandated by the Fiscal Responsibility Act (FRA) until 2022; however, the government has penciled in a primary deficit even in 2024, while the FRA requires a primary surplus. Along these lines, Finance Minister Ken Ofori-Atta is planning to raise a record-high amount (USD 3-5bn) of Eurobond debt in early 2021, market conditions permitting.

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