The 24-hour economy proposition for Ghana: The demand question still lingers

The attempt by the opposition National Democratic Congress (NDC) to cash in on the popularity of the 24-hour economy idea is running through the nerves of the ruling New Patriotic Party (NPP) gurus like electrons.

With an exceptional record of success in political sloganeering themselves, the NPP is wary of the havoc such a mantra, if not discredited, can cause.

“This could be a game changer—if you can’t get a job during the day, you might get one at night”—a comment and an apparent endorsement of the24-hour economy proposition by the Chairman of the Trade Union Congress (TUC), which has sent the communicators of the ruling Party running helter skelter.

Dr. Bawumia, the Vice President and the Presidential Candidate of the NPP, hounds: “The 24-hour economy is not a bright idea; it is a bad idea, it exists already”. Another minister of State, in desperate attempts to discredit the proposition, said the 24-hour economy with men trying to work at night could lead to people taking their wives.

According to the NDC, the proposition is a deliberate policy intervention to encourage and support certain businesses and companies to operate 24/7, and it would promote efficiency in 8-hour schedule institutions and businesses.

To the minds of many people, the efficiency, improved productivity, and potential new job creation arguments are very sound.

Nonetheless, some critics say the 24-hour economy is incompatible with the Ghanaian economy because of low demand and insist the 24/7 economy can only be possible if there is high demand for goods and services.

This demand question is spot on and could be the killer question for the proposed policy. The NDC needs to provide succinct and convincing explanations as well as communicate practical strategies for stimulation of demand in order to seal the deal with most Ghanaians.

The proponents and indeed some independent experts such as Dr. Theo Acheampong, an investment and political risk analyst, fingered the country’s import expenditure items and argued that that is demand.

Let’s get the demand basics right. The demand for domestically produced goods is the quantity that consumers will be able to buy at a given price level, while the supply is the quantity that domestic firms are willing to supply at a given price level. The equilibrium demand, the quantity domestically produced and demanded at the given price level, is what determines the size of the domestic industry and what matters in the debate.

The deficiency in high imports, meaning potential demand for domestic goods, is explained by the fact that it fails to recognise the main pain of our problem that the uncompetitiveness of the domestic sectors has raised domestic price levels and eroded demand for domestically produced goods.

To illustrate, let us consider the demand for broiler chicken. The demand has been substantially driven by a culture of sharing birds, cooking oil, yam and rice as gifts during Christmas seasons, which poultry farmers target to produce. Until last year, I used to receive two chickens from my institution every year—one from management and one from the union—and I also purchased more from the market for other families.

When the price level rose to GH¢120 in 2022, myself and both my school and union stopped the culture. Nevermind the outcry about institutional hamper expenditure.

As a result, poultry farmers toiled to sell their birds, and the subsector is almost vanishing, effectively also dashing any hope of the industry in producing to substitute imported frozen chicken, which has been a main source of protein in Ghana.

The NDC claim they would stimulate demand by improving competitiveness as well as through import substitution and export-led growth strategies. How these would be done practically and differently from what earlier governments have said over the years is, however, not yet tellingly explained.

Import substitution strategies are hard to sell as they are seen as obsolete, boorish often ill thought through.  So are export-led growth strategies because the Ghanaian economy is highly uncompetitive at the moment.

Why don’t we just keep it as simple as operating 24/7 to expand our domestic sectors, over which domestic policy has reasonable control?

Again, most of the highlighted strategies — if overexploited without major headway already—are major policies requiring several specific strategies themselves, making them complicated to explain with simple slogans.

 Even if the sloganeering works in selling the policy, it’s important Ghanaians understand the intricacies before buying into it. A lesson from the One District-One-Factory (1-D-1-F) of the NPP was that the mantra came across as though there was going to be one new factory in every district specialising in and producing at least one thing. Because we didn’t understand the intricacies and ask the critical questions, when it got to the implementation stage, we got told already-existing firms who received some support under the policy could also be branded 1-D-1-F factories.

The proponents of the 24/7 economy promise to incentivize firms to operate at night. Per his record, President Mahama has at least exhibited interest in supporting indigenous firms—whether in the form of Eximbank, support for pharmaceuticals, supexplaine RLG or GYEEDA. These efforts were, however, plagued with cronyism, diversion of funds, inadequate budgetary provision, and dishonesty by the firms. Incentivizing firms is an old trick that has been quite costly with very little results.

While supply-side incentives have hardly worked, there is growing evidence that demand-side incentives are more effective.

Hence, the 24-hour economy policy strategy could focus more on the demand side or, at best, bundle incentives for firms with incentives for buyers.

Reduced VAT on certain goods at night may be simpler and more effective than just a tax cuts for firms. The cocoa sector has been successful because it has combined support for farmers with guaranteed purchases. Nevermind the corruption and diversions associated with the supply of subsidies for cocoa.

Given his record of supporting indigenous sectors, perhaps the ex-President may have more credibility for moral suasion to increase domestic demand through the promotion of Made in Ghana than his opponents believe.

He must expand the crusade to include Made in Ghana, Buy Made in Ghana. Moral suasion, budgetary allocation and procurement regulation, government purchases, trading companies, and local content requirements can be effective strategies for stimulating domestic demand.

Regulated trading companies, for example, can through orders, specifications, and support to indigenous small firms for better finishing stimulate domestic demand and increase productivity. Through enforcement of local requirements, multinational /transnational supermarkets could be compelled to dedicate a percentage of shelf space to certified made in Ghana goods.

On the supply side, perhaps regulatory voids and their associated excessive cost burden and deadweight losses are limiting the expansion and profitability of indigenous activities and have increased the risk even for firms that have accessed financial incentives. We, therefore, suggest regulatory relaxation and the institution of regulatory compliance incentives, where appropriate.

Taking clues from the policy branding success of the NPP, a few of these suggested mantras can be good food for thought to market the specific strategies under the 24-hour economy.

“Year of Made in Ghana”—public institutions shall be directed, and private actors would be encouraged to use and celebrate at least one certified made in Ghana product at every public event.

“No made in GH, no public spending”—public institutions would be compelled and regulated to use a percentage of the goods and services budget on certified made in GH goods.

“Buy Made in GH and get More Pay”—Wage top ups and some allowances of the public sector officials shall be ring-fenced and can only be spent on certified made in Ghana goods.

Presumably, from the debate so far, NDC is compelled to agree that the success of the 24-hour economy depends on government incentive.

Incentivizing firms on the supply side involves advancing State intervention or motivation to firms before the intended impact. This leaves room for policy implementers and firms to divert and misapply funds, and the risk of huge public debts with little impact.

 Demand-side incentives, on the other hand, put motivation to firms at the end of the cycle, and firms are moved to undertake to reap the reward after the impact has been created but may require intermediary financing.  Demand-side incentives are less risky to the State but if attractive, firms would shift heaven and earth to undertake.

By Dr Harrison Adjimah

Source: GNA

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