Would COVID-19 trigger ‘Creative Destruction’ in Africa? Overview, mitigation and implications for businesses in Ghana from Emmanuel Yeboah-Assiamah Researcher, University of Ghana and GCRF Fellow, University of Manchester

  1. Introduction

The concept of creative destruction was coined by Joseph Schumpeter (1942) to connote an incessant product and process innovation mechanism by which new production units replace outdated ones which has been regarded as an essential fact of capitalism. How has the dreaded COVID-19 exposed the structural weaknesses of the African state? How would COVID-19 displace many businesses and sectors in Africa? Does this suggest a need to fold up or cut down operations and remain lean? Using particular insights from Ghana, this piece seeks to provide an overview of the COVID pandemic and public policy interventions so far and more importantly some pointers for reflections on the fallout of COVID-19 on Ghanaian businesses.

Overview of COVID-19 in Ghana and public policy response

The initial two cases of Covid-19 were confirmed in Ghana on 12 March 2020, which have since spiralled to 1154 cases, with 9 deaths and 120 recoveries as of 22nd April 2020. This works to a recovery rate of about 10.3% and mortality rate of approximately 0.78%.

Some interventions

On March 15, a notice was issued which strongly discouraged international travels to Ghana until further notice and non-admittance of travellers from those countries which had recorded at least 200 positive cases of COVID-19. The latter restriction, however, was not applicable to travellers who are Ghanaian citizens as well as those with resident permits. The day also saw a launch of a dedicated website[1] for reporting regular information and update on Ghana’s COVID-19 situation.

In the night of same day, the President of Ghana, Nana Akufo Addo banned all public gatherings including conferences, workshops, funerals, festivals, political rallies, church activities, schools and other related events to reduce the spread of COVID-19 at a press briefing on the state of COVID-19.

Following detection of community transmission, as at 27 March, Ghana had confirmed a total of 137 cases. In order to contain community spread, the President further announced a two-week partial lockdown to place restrictions on movement in key cities of Greater Accra Region, Greater Kumasi and another hotspot (Kasoa). This partial lockdown was, however given another one-week extension and was finally lifted on 20th April, 2020 although the earlier restrictions on mass gatherings remained valid[2].

Public policy interventions

  1. Pre-COVID 19 and ‘a priori’ public awareness creation

The Ghana Health Service (GHS) and Ministry of Health had started with awareness creation and indicated their preparedness to deal with the COVID-19 if it finally found its way into the country, especially, when the disease had become visibly closer as some neighbouring African countries such as Nigeria had confirmed some positive cases. The GHS in a press release reiterated some precautionary measures that citizens could adopt to hold standfast and to stay safe. These were: regular washing of hands with soap under running water and the use of hand sanitizers on regular basis; the practice of cough/sneeze etiquette; and the need to self-quarantine for at least 14 days if one came into country from abroad.

  • Terms of reference for Ghana’s COVID-19 agenda

The Government of Ghana formed a COVID-19 Response Programme which was to be coordinated by Dr Anarfi Asamoa-Baah, a former Deputy Director-General of the World Health Organisation (WHO). In all its activities, the COVID-19 Response Programme set out five key objectives which underpinned its activities: limit and stop the importation of the virus;
contain its spread;  provide adequate care for the sick;  limit the impact of the virus on social and economic life and; inspire the expansion of our domestic capability and deepen our self-reliance. 

Chasing the virus to avoid the virus chasing the population

The Ghana Health Service and Government of Ghana adopted an approach of rather chasing the virus among the population which involved mandatory quarantine, enhanced surveillance and contact tracing to test and treat people who were even asymptomatic. Out of its contact routine surveillance model, at least 16,870 tests had been conducted, the enhanced contact tracing model had resulted in at least 49,699 tests whilst the mandatory quarantine had resulted in 2022 tests which all had confirmed 383; 544 and 115 positive COVID-19 cases respectively[3].

COVID-19 and the vulnerable people: Social interventions

Generally, the COVID-19 pandemic has had a debilitating impact on the socio-economic, cultural and political lives of all people world over and Ghana has not been an exception. With over 70 percent of its population in the informal sector whose sources of livelihoods require being physically out there on a daily basis, cannot sit in the comfort of their homes and expect their accounts to be credited at the end of the month, many people became worse off when there was three-week lockdown of economic activities in parts of Accra, Kumasi, Tema and Kasoa. Even many individuals who work in the formal sector (private sector) due to a ban on many social activities and particular businesses, have been rendered redundant with some already laid off. Consequently, following the ‘three-week’ partial lockdown, the Ministry of Gender, Children and Social Protection; faith-based organizations; corporate entities and individuals identified the lots of vulnerable individuals to offer them hot meals and other food items to support them. The Government of Ghana has also made interventions to cushion Ghanaians in terms of paying for their utility bills, this includes absorbing the water bills of all Ghanaians for the next three months and as well as fully absorbing and partial absorption of electricity charges depending on the household consumption.

State-society relations for robust efforts

The government of Ghana announced a COVID-19 Fund to be administered by a board of trustees and chaired by a recent past Chief Justice of the country. Launching the fund, the President of Ghana used his next three-month salary as the seed capital. Other ministers of state and their deputies as well as Speaker of Parliament used part of their salaries to shore up the fund. The fund has also seen many corporate organizations including many associations donating huge sums of moneys which are publicly disclosed.

  • COVID-19 and Business Management in Ghana

The COVID-19 is projected to have a substantial adverse impact on Ghana’s economy which would have implications on businesses as well. Ghana’s estimated GDP growth is set to plummet from a target of 6.8% to about 2.6% in 2020.

The country is gradually feeling the brunt of the impact of the outbreak of the coronavirus disease (COVID-19) which has compelled some businesses to summarily halt or downsize their operations. Those businesses in the hospitality industry have been gravely affected following a closure of Ghana’s borders, a general slowdown in tourism and demand for international travel as well as ban on large conferences. Those businesses engaged in trading activities are also projected to be gravely affected following a global and local decline in trading volumes and values due to disruption in supply chain globally. Those managers and CEOs in these sectors are actually in deeper ethical dilemma of whether to lay off workers, to cut employee pays or any other related model. 

The set of restrictions and bans on social and economic activities announced by the President affected many businesses especially those market women and men who usually depend on daily sales and hustles to make a square meal. Conference organizers and many firms in large funeral value chain have gravely been affected as well.

Those engaged in importation and trade business (e.g. Ghana Union of Traders Association, GUTA) have had their own challenge as it has become difficult to source for supplies from their usual suppliers abroad as the pandemic has resulted in global slowed production and even the need for companies to primarily produce for their home countries as priority with virtually little or no surplus to supply to other countries. The latter would compel countries to think and rethink about structural economic transformation and a need to put their destiny in their own hands and to develop manufacturing hubs from within. Those supplies that had been shipped already reached the ports whilst the country was under partial lockdown which would make it difficult to sell products to any distributor or retailer. Their dilemma was compounded by the fact that while trying to grapple with how to distribute and sell off their goods to recoup their investment amidst lockdown, an initial notice of liability to pay for demurrage if goods were not cleared on time at the ports[4]

Mitigation measures

In order to ensure businesses to get back to their feet after COVID-19, the Government of Ghana has proposed a reduction in the policy rate by 150 basis points to 14% and drop in regulatory reserve requirement from 10% to 8% to increase supply of credit to private sector.

The Government has engaged with commercial banks to provide syndicated facility of GHS3bn to support key industries; to grant six-month moratorium on principal repayments for selected businesses; and to reduce interest rates by 200 basis points, also to increase credit supply to the private sector.

The Government has proposed to roll out a GH¢600 million (equivalent to USD 104 million) soft loan scheme for Small and Medium Scale businesses in the country which will have a one-year moratorium and two-year repayment.

As part of reducing the economic impact of the COVID 19 pandemic, businesses and companies whose consumption rates of electricity are higher would have half of these costs absorbed by government whilst water bills will be fully covered.

  • Conclusion: Creative destruction and New ventures? Necessity, mother of inventions

Whilst there has been a general decline in business activities, those businesses in the telecommunication sector appear to be main beneficiaries of the lockdown and restrictions on mass gatherings. Many people have resorted to the use of online or virtual forms of meetings which has led to increase in demand for data services.

Following the increase in demand for hand sanitizer and face masks relevant to preventing the spread of the novel corona virus, many businesses diversified in their operations. For example, Adonko Bitters Limited which is a beverage manufacturing had to temporary reduce its production of alcoholic beverages to venture into the production of hand sanitizers as demand for such products was on the rise. Few other businesses also discovered some new frontiers which could temporarily bring some income.

Indeed, they say necessity is the mother of all inventions, the outbreak of COVID-19 has unleashed the hidden potentials of Ghanaians with few individuals and institutions coming up with greater innovations which could become greater industrial hubs if receive the needed business management model and investment. For example, one Richard Kwarteng has invented a solar powered automated hand washing machine which caught the attention of the Ghanaian President and has since received a fast-tracked certification from the Ghana Standards Authority to commence commercial production. This is illustrated in figure 1.

Figure 2 illustrates locally manufactured ventilators to help those COVID 19 patients that may become critically ill.

Man Turns drum into Solar Basin for Washing Hands to Fight COVID-19
Figure 1: Solar automated hand washing machine

Ghanaian Professor to Develop Lowcost Ventilator for COVID-19 Patients
Figure 2: Ghanaian Professor to develop low cost ventilators for COVID-19

If innovation meets a robust business model, this can stimulate mass production and internationalization.

The pandemic has also brought to the fore that local people and businesses when given the needed support could foster production of essential products and services required by the African economy. For instance, following incessant global demand for PPEs and acute shortage in supply to poorer countries, government of Ghana saw a need to liaise with local businesses to encourage them into the production of relevant pharmaceutical products and PPEs. Figure 5 illustrates the Minister of Trade and Industry inspecting local production of PPEs. If local businesses have risen to the occasion during pandemic, it suggests they are indeed capable and should be given the congenial environment and concessions to operate.

Whilst COVID-19 has generally slowed down many business activities, it also presents many other newer business opportunities which only require companies to reconsider their business models and to strategize. They need to carry out environmental scanning to assess the many newer business opportunities and to align with existing strengths and to capitalize on the government stated stimulus package to engage in some operations whose demand are higher.  

It will also ignite the call for self-reliance and promotion of manufacturing activities in Ghana. For example, the government of Ghana greatly engaged with local manufacturing companies to assist in the domestic production of PPEs which hitherto had essentially been imported.

The demand for hand sanitizers, hand washing devices and other PPEs has come to stay and presents business opportunities for entrepreneurs and companies to adopt different business models and marketing mix to make good use of such business opportunities.

More importantly, rational African government are more likely to offer some protection and support for production and manufacturing companies as these are the only sureties for self-sufficiency. The fallout of this pandemic should be a rise of large conglomerates and budding industrial hubs in manufacturing of relevant products, a need to nurture home grown businesses for production of strategic products as well as crucial concession for research and pharmaceutical industries. Prospective entrepreneurs, investors and existing businesses need to think deeply and to assess the context of respective African countries in order to align their capacities and resources to the needs of the economy.

[1] https://www.ghanahealthservice.org/covid19/

[2] all public gatherings including conferences, workshops, funerals, festivals, political rallies, church activities, schools and other related events which had been imposed on the 15 of March however remained intact.

[3] https://www.ghanahealthservice.org/covid19/

[4] Upon petitions by the GUTA and media interviews, the Ghana Shippers Authority finally announced the suspension of demurrage/detention and rent charges at the ports beginning 30 March 2020 following the outbreak of the coronavirus pandemic.

Citer ce billet
Ulrike Schuerkens (2020, 23 avril). Would COVID-19 trigger ‘Creative Destruction’ in Africa? Overview, mitigation and implications for businesses in Ghana from Emmanuel Yeboah-Assiamah Researcher, University of Ghana and GCRF Fellow, University of Manchester. ManaGlobal : Globalized Governance Norms and Local Business Practices. Consulté le 17 juin 2024, à l’adresse https://doi.org/10.58079/r7v9

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