OBG talks to Stephen O’Brien, UK Under-Secretary of State for International Development

Interview: Stephen O’Brien

How can African countries balance the need for increased capital inflows with the sustainable management of natural resources and inclusive growth?

STEPHEN O’BRIEN: Huge revenue streams bring about the possibility of transformative growth if the money is not wasted or, worse, used in a way that damages governance and economic progress. It is also important to note that whilst extractive booms almost always boost GDP, this often does not translate into development.

The large revenue streams that are associated with natural resource extraction can have huge impacts on the economy, and governments often do not have the capacity to manage these effectively. If unchecked, inflation and exchange rate appreciation can cause local manufacturing and services to become uncompetitive. External volatility in commodity markets can introduce volatility into domestic markets. Managing such volatility is a significant macroeconomic challenge, and policies need to be in place in advance, such as establishing stabilisation funds.

Public financial management systems may not be able to cope with large inflows and the executive may be unable to measure flows effectively. Ghanaian oil finds are not, by global comparison, large, and so the windfall will be relatively small and temporary. This has implications for how the windfall is spent. For example, it would be inadvisable to commit to a large increase in recurrent expenditure that cannot be maintained, or to allow an appreciated exchange rate to undermine other industries such as cocoa.

What can be done to help increase per capita income in northern Ghana, and what can the UK do to help bridge the regional disparities?

O’BRIEN: Ghana has achieved significant economic development in the last 20 years, yet the north of the country remains poor, with two out of three people living on less than $1.25 a day. Between 1992 and 2006, the number of poor people declined by 2.5m in the south and increased by 0.9m in the north. These challenges are recognised, but development efforts in the north have failed to reduce the persistently high levels of poverty, suggesting significant coordination failures.

There is potential for economic growth in the north, with less than 10% of agricultural land being cultivated. The best way to address the chronic poverty is through a paradigm shift stimulating economic growth through the most abundant resources and inducing long-term adaptation to climate changes. In 2010 the government set up the Savannah Accelerated Development Authority (SADA), and this has the potential to address the chronic coordination failures and encourage added-value approaches to development.

Ghana’s development goals include promoting gender equality and women’s empowerment. What can be done to increase the female employment rate?

O’BRIEN: Trends show that Ghana is on track in achieving gender parity at the primary school level. But Ghana does not score well with respect to female participation in wage employment. The Ghana Living Standards Survey (2008) confirms that the proportion of males in wage employment is much higher (25%), than for females (8.2%). To reduce the gender gap in wage employment, various interventions are needed.

Girls are still excluded from education more often than boys, especially at the secondary and tertiary levels. The UK’s department for international development in Ghana is currently working with the Ministry of education to support thousands of girls with incentives to complete their full cycle of schooling.

Gender differences in access to economic opportunities arise in part because women are “time poor”. Deep-rooted norms place the responsibility of household work on women and girls, leaving them with less time than men and boys to engage in work outside of the house. Addressing these norms requires policies that will free up women’s time to engage in the labour market. Information and communication technologies can play a role in facilitating women’s access to markets.