Ghanaian vice president HE Mahamudu Bawumia during an interview in Nairobi after the swearing-in of president William Ruto. [Denis Kibuchi, Standard]
Among the dignitaries who attended President William Ruto’s inauguration last week was Ghana’s Vice President Mahamudu Bawumia. Financial Standard caught up with him for his insight on a range of issues, including lessons Kenya can borrow from Ghana’s digital revolution that he has been spearheading fast.
What is your take on Kenya’s peaceful political transition after the hotly contested August presidential polls?
It is just not a Kenyan success story but an African success story to have a peaceful transition of power.
We remember the old days of difficult transitions and since we have embarked on the democratic journey, every step and milestone is very important.
How would you rate the diplomatic relations between Kenya and Ghana?
We have very good relations that date back to independence, where our first President Kwame Nkurumah and Kenya’s first President Jomo Kenyatta shared good relations. They both engaged in the independence struggle against colonialism through their respective movements. Then, our relationship has been growing. There is a sizeable Kenyan community in Ghana and because of Kenya Airways, a direct flight which I come on, there are a lot more commercial ties between the two countries.
Africa is in the process of implementing The Africa Free Continental Trade Area (AFCTA). What is your view on its implementation and potential challenges ahead?
People like Kwame Nkurumah were a bit ahead of their time with their vision as they held a view that Africa needed to be cooperative and united, which today is being manifested.
AfCTA is the biggest free trade area in the world. It is important that Africa trades by itself as we have largely traded with our colonial masters. AfCTA is an idea whose time has come, and Ghana is the secretariat hence we are passionate about it. There are a lot of opportunities to be realised. The bottlenecks include logistics, transportation and payments, but recently, I launched the Pan African Payment and Settlement Systems (PAPS) in collaboration with the Central Bank that allows someone from Kenya to buy something in Ghana in Kenya shillings without the need to worry about third -party currency like the US dollar to trade. This is a major innovation that will help us bridge the gap that we have in the payment and settlement area.
Inflation is a major issue for many countries in Africa, how is Ghana coping with the challenge?
The cost of living across the world has just increased phenomenally on the back of the Covid-19, which disrupted the global supply chain and increased shipping costs almost 12-fold. When we thought we were recovering, we had Russia-Ukraine war that has caused an increase in energy costs and as a result, food prices skyrocketed. It has affected every country and Ghana has been no exception. We are trying to deal with the issue in the context of very squeezed and tight budgets.
On the monetary side, the Central Bank is trying to contain inflation with their monetary policy through a number of interest rate increases to try to contain the situation. The government continues to offer free senior secondary school education to our citizens, which lessens the burden on families in terms of the cost of living.
While at the Central Bank, inflation once went down from 40pc to around 10pc. How did you deal with this?
To reduce inflation, you need a good mix of fiscal policy and monetary policy. Inflation is fundamentally a monetary phenomenon, and it’s the fiscal that can drive the monetary side of it. If the fiscal side is not excessive, and your balances are not excessive, you may have to enrol on monetary financing of that deficit, which reduces pressure on prices.
You are then able to contain inflation. We implemented an inflation target framework, one of the few African countries at the time, and it has proven very successful but that alone is not sufficient as you also have to look at the output side by increasing production.
President Ruto ran his campaigns on the promise of a bottom-up economic model, what’s your take on it?
The bottom-up economic model is a model of inclusiveness, which is fundamentally a good model. What we have seen in Africa since independence is that we have had development without inclusion. Sixty years after independence, many people do not have a bank account or access to electricity. So many people are excluded from the economic system. If you are trying to transform an economy, you cannot do it on exclusion because a substantial population are among those excluded. The idea that President Ruto has of the bottom-up model is a good one, and I think is one that many other African countries should emulate.
You have been at the forefront of spearheading digitisation, what is its effect been on the economy?
In Ghana, we have really focused on pursuing digitization as an economic strategy.
We are now in the fourth industrial revolution globally, which is a digital revolution. It is a revolution based on data and systems. If you don’t digitise, you are going to be left behind.