Negative impact of political interference in public, corporate affairs

By Prof. Samuel Lartey

Introduction

IN Ghana, as in many other democracies, politics plays a central role in shaping the trajectory of national development. The term ‘Government Official 1’ has become synonymous with the involvement of high-ranking political figures in affairs that directly or indirectly influence public policy, businesses, and economic activities.

While some political actors champion progressive agendas, there is a growing concern about how their actions, or lack thereof, stifle corporate interests, increase job losses, and contribute to the socioeconomic underdevelopment of the nation.

This feature explores the mechanisms through which political actors interfere in public affairs and business environments and examines how this interference negatively impacts economic growth, corporate interests, and employment in Ghana.

The Philosophy of ‘Government Official 1’

The concept of “Government Official 1” refers to high-ranking political figures who exert significant influence over public and private affairs, often to the detriment of economic growth and corporate interests.

In Ghana, political interference has a long history, especially since the advent of the Fourth Republic in 1992. Political figures influence key sectors such as energy, finance, and agriculture, shaping policies to suit political objectives rather than economic or social development goals.

Since 1992, Ghanaian politics has been deeply intertwined with economic management. High-profile political actors often hold sway over state institutions, regulatory bodies, and public corporations. For example, the politicisation of the energy sector in 2015 led to a major power crisis known as “dumsor,” which resulted in over 500,000 job losses across various industries.

In the banking sector, the collapse of nine local banks between 2017 and 2019, driven by political decisions, cost the state GH¢12 billion in taxpayer funds.

Despite the negative effects, political involvement sometimes brings short-term benefits, such as swift policy implementation during election periods. Politically motivated infrastructure projects, for instance, can quickly address immediate social needs, such as roads and schools. Political actors also sometimes play a role in fostering international trade agreements that can boost the economy in the short term.

The challenges, however, far outweigh the benefits. Political interference often leads to inefficiency, corruption, and waste. The Auditor General’s Report in 2023 highlighted over GH¢4 billion in procurement irregularities tied to politically motivated contracts.

The public debt continues to rise, with Ghana’s debt-to-GDP ratio hitting 76% in 2023. Moreover, the unemployment rate reached 13.4% in 2021, largely due to the crowding out of corporate interests and the collapse of local businesses under political pressure.

The concept and practice of “Government Official 1” plays a critical role in Ghana’s politics, the tendency for political actors to interfere in economic affairs has had long-term negative impacts on Ghana’s socioeconomic development. Effective reforms and stronger institutions are necessary to reduce political interference and promote sustainable economic growth.

The Intersection of Politics and Public Affairs

Politics in Ghana’s Fourth Republic, beginning from 1992, has been a highly dynamic force, influencing almost every facet of public life. Political actors are often seen wielding substantial control over key state institutions such as the judiciary, regulatory agencies, and parastatals.

 This control creates an environment where policies are shaped by political interests rather than by the long-term benefits to the economy or the citizenry.

A case in point is the political interference in key industries such as energy, telecommunications, and agriculture. In 2015, the challenges faced by the Volta River Authority (VRA) and the Electricity Company of Ghana (ECG) were exacerbated by political directives that delayed the restructuring of the energy sector.

This resulted in power crises, commonly referred to as ‘dumsor’, which led to the collapse of several businesses and the loss of approximately 500,000 jobs over two years. The adverse effects on small and medium enterprises (SMEs), the backbone of the Ghanaian economy, were profound.

Crowding Out Corporate Interests

The Ghanaian economy is structured around both public and private sector contributions. However, political interference often results in public sector dominance, crowding out private investments.

A clear example is the banking sector crisis between 2017 and 2019, where the government’s financial policies and political decisions led to the collapse of nine local banks, including prominent institutions such as UT Bank and Capital Bank.

The Bank of Ghana cited poor corporate governance and financial irregularities, but the crisis revealed deeper political underpinnings.

The government’s decision to implement stringent regulatory measures disproportionately affected indigenous banks, while foreign-owned banks remained stable. This led to job losses for more than 3,000 employees in the banking sector and created uncertainty in Ghana’s financial ecosystem.

According to the 2019 Annual Report of the Bank of Ghana, the cost of the banking sector cleanup was estimated at GH¢12 billion, which was borne by the taxpayers, further highlighting the intersection of political decisions and economic repercussions.

Impact on Job Creation and Employment

Political interference in the Ghanaian economy does not only affect businesses but also severely undermines job creation. High-profile political appointments often prioritise loyalty over competence, leading to inefficiencies in state-owned enterprises (SOEs) and public services.

For instance, political appointments in the Ghana Cocoa Board (COCOBOD) have led to inflated contracts, delayed payment to cocoa farmers, and general mismanagement of the cocoa sector. In 2020, cocoa production fell by 5%, a significant drop for a country whose economy relies heavily on this cash crop for foreign exchange.

Furthermore, the Ghana Statistical Service (GSS) in its 2021 Labour Force Survey indicated that the unemployment rate stood at 13.4%, with youth unemployment soaring to over 25%. These figures are telling of a system where political decisions hinder private sector growth and stifle job creation. Large corporate entities, faced with political pressure, often reduce their workforce or relocate operations to other countries within the West African sub-region, contributing to brain drain and the loss of talent within Ghana.

Influence on Social and Economic Development

The actions of political actors also have broader implications for socioeconomic development. A notable example is the politicisation of infrastructure projects, where political actors initiate projects not based on national needs but on electoral gains. Projects like roads, hospitals, and schools are often left incomplete or poorly executed, draining national resources.

According to the 2023 Auditor General’s Report, the government lost over GH¢4 billion in public procurement irregularities, with a significant portion attributed to politically-influenced contracts.

The diversion of public funds from productive sectors to politically motivated projects impedes economic growth and leads to rising public debt levels. Ghana’s debt-to-GDP ratio, which reached 76% in 2023, highlights the financial strain caused by such inefficiencies.

Moreover, politically induced corruption has far-reaching consequences for social services. The health sector, for example, has witnessed frequent delays in the release of funds for essential services, resulting in poor health outcomes for citizens.

According to the World Health Organisation (WHO), Ghana’s maternal mortality rate increased from 308 deaths per 100,000 live births in 2019 to 320 deaths per 100,000 in 2022, largely due to underfunded health services influenced by political interests.

The Way Forward: Reducing Political Interference for Economic Stability

To mitigate the adverse effects of political interference, there must be a conscious effort to separate political interests from economic management. Stronger regulatory frameworks, particularly in sectors such as finance, energy, and agriculture, must be developed and enforced without political bias. Additionally, there is a need for transparent procurement processes that prioritise value for money rather than political affiliations.

Economic experts suggest that for Ghana to achieve sustained growth, political actors must reduce their involvement in the day-to-day operations of businesses and state-owned enterprises.

The introduction of policies such as the Public Private Partnership (PPP) Act in 2020 is a step in the right direction, but more must be done to ensure that businesses can operate without undue political pressure.

Conclusion

The influence of politics and political actors in Ghana’s public and private sectors has profound consequences on the economy, businesses, and the lives of ordinary citizens. From job losses to stalled infrastructure projects, the evidence is clear that political interference hinders socioeconomic development. Ghana’s journey toward a prosperous future depends largely on curbing the political influence that crowds out corporate interests and disrupts economic growth. By fostering a business-friendly environment devoid of political bias, Ghana can unlock its full potential and create a more stable, equitable, and prosperous society for all its citizens.