Ghana (Finance)

Ballot for Notices of Motions – in the House of Commons at 12:00 am on 14th April 1965.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Howie.]

2.33 a.m.

Photo of Mr John Cordle Mr John Cordle , Bournemouth East and Christchurch

The matter which I wish to raise on the Adjournment, the opportunity of which I very much welcome, is a far cry from the preceding debate. I propose to talk as briefly as possible, because I know that other hon. Members also wish to speak about the present position of Ghana's finances.

Those of us who have been privileged to visit Ghana on occasions know how warm and friendly, clever and industrious are the people. It is a rich country abounding in natural resources—gold, timber, diamonds, manganese, fisheries and, above all, cocoa. It is, indeed, a country which provides itself with every base for a sound economy.

I approach the subject of Ghana's economic difficulties with great hesitancy, but I believe it to be in the best interests of both the Ghanaians and ourselves that this urgent and important matter should be ventilated and that Her Majesty's Government should give assistance when it is possible to help a member Commonwealth country through her difficulties.

The main factor in reducing Ghana's revenue has been the slump in cocoa prices. In 1963, in collaboration with cocoa-producing countries, we made strenuous efforts towards international agreement on a stable price for cocoa. Ghana's judgment, however, was that this would be against her interests and negotiations broke down, with disastrous results both to Ghana and to other countries dependent largely on cocoa. We would hope that in the interests of all cocoa producers a fresh attempt will be made to secure an international agreement on a stable price of cocoa.

The complete lack of understanding of the gravity of the financial and economic situation in Ghana both at home and in its relationship with the outside world underlined by the statement made on 12th January by President Nkrumah at the formal opening of the budget session of Parliament. He laid the blame for the disastrous fall in Ghana's revenues mainly on the manufacturers and speculators in the cocoa trade. In the face of this slump in revenue, he announced that budget expenditure would rise to £200 million compared with £144 million in the 1963–64 estimates, and that if credits were available from abroad the figure would be stepped up to £250 million. He completely ignored the fact that even if the indicative price of £190 a ton for cocoa were to be realised the expenditure of even 75 per cent. of the estimated total for the next year could not possibly be sustained.

Taxation proposals were not announced by him, but the law of diminishing returns already took effect during the last two years. Of foreign companies operating in Ghana, some are still making profits, but they are profits which cannot be remitted. Foreign exchange is short and import licences are difficult to get. Overseas companies are finding it difficult to continue their operations.

It may be useful at this point to compare the state of affairs which existed at the time Ghana achieved its independence on 6th March, 1957, with what is believed to be the position at present. Central Government revenue in 1957 was £60 million, and in 1964–65 it had risen to £133 million. Central Government expenditure in 1957 was £52·8 million, quadrupling to £200 million in 1964–65. In extenuation it can be said that since the price of cocoa fell below £220 a ton after 1960 expansion of the economy of Ghana became more difficult. That was the time when the situation should have been drastically reappraised, but expenditure on social services and on development plans have not reflected the unfavourable trend of Ghana's external earnings. Indeed, the expenditure estimates have continued to grow at a galloping pace.

Since 1959 when the last budget surplus was registered resort has been made to deficit financing, and deficits totalling £183 million have been incurred. In the first place, deficits were covered by the redemption of foreign securities and decreases in the cash balances held abroad, but since 1960 they have been financed mainly from internal sources, notably from the issue of Government stocks, Treasury bills and advances from the Central Bank. Another source, suggested by Mr. Nicholas Kaldor, but since abandoned because of its great unpopularity, was the national development loan raised by means of compulsory savings, but these have not been redeemed.

Between 1959 and 1965 the national debt has increased from £23 million to £237 million, of which £80 million represents the external debt and £157 million the internal. The bulk of the external debt is in the form of suppliers' credits granted under trade agreements and other bilateral arrangements, and it is noteworthy that they are mostly repayable in sterling, dollars or deutschmarks, even though many are with suppliers from the Eastern bloc countries.

Total visible trade, which showed a favourable balance in 1959, deteriorated so greatly that during the period 1960–63 adverse balances amounting to £64 million were incurred. As a corollary Ghana's balance of payments position worsened. In 1951 the deficit on current account was £52 million. Exchange and import controls in 1962 reduced this deficit to £28 million, but it increased again to £46 million in 1963. The seriousness of the position is well reflected by the reduction in foreign exchange reserves.

The pace of economic growth, which advanced at a steady average of 7 per cent. in the years prior to 1961, mainly as a result of expansion in cocoa production, has now come to an almost complete standstill, largely through a slump in cocoa prices. The rate of increase in agricultural production has declined, and there is marked fall in mineral output. Despite the moderate increase in terms of trade in 1963, earnings fell because the volume of exports was less. Ghana shared with Ceylon the unenviable distinction of being the only countries in the Commonwealth whose export earnings failed to increase during 1963.

Like so many other under-developed countries, Ghana has staked heavily on investments in the manufacturing industries to provide import saving goods with a view to reducing the pressure on her external reserves. Although the Government have by their repeated public statements welcomed foreign capital, their actions have not kept pace with these statements. The confidence which would have been generated by the removal of the restrictions on the repatriation of profits has been undermined by the imposition of a penal surtax on such operations.

In the event, State enterprises have been created which, generally speaking, have failed because of lack of practical ability. Of 32 State-owned corporations in which the Government have invested about £40 million, net accumulated losses to date have been incurred of nearly £14 million, principally by the State Mining Corporation £6 million; Ghana Airways—£5·1 million; and the State Farm Corporation—£2·4 million.

The development plan lists a number of projects in the public sector which should by now have come into production. A recent survey of industrial development in Ghana has, however, found that most of them are seriously behind schedule, mainly because of difficulties on the civil engineering side.

By contrast, some projects in the private sector are operating efficiently. A soap factory of Unilever is a good example, and the textile printing works at Tema, which will be managed by Unilever and A.D.A.T.I.G., should prosper. A cocoa-processing factory and steel works at Tema have every chance of success, as has a projected glass factory at Tarkwa. In contrast to the losses made by the State-owned enterprises, the joint State-private enterprises showed total accumulated profits of over £600,000 from total investments of £1 million.

The picture which has been presented is serious. This is underlined by The Times report yesterday on the total refusal of leading Western nations providing millions of dollars in emergency loans to alleviate what it describes as a desperate balance of payments situation. So far the U.K. Government has been careful not to offer advice which would no doubt have been resented, but if the Commonwealth is to mean anything, surely the time is upon us when our Government should make a fresh attempt to consult Ghana to seek an opportunity to help her find a way out of these temporary but very serious difficulties.

In the end, the initiative must come from the Ghana Government themselves. Surely help from Britain, whether from the public or private sector, can be effective only if the Ghana Government can bring their expenditure more nearly into balance with their earnings, and in this I return to my main point. The need is to be able to plan ahead on the basis of a reasonable and stable price for cocoa.

The Ghanaians are members of the Commonwealth in whom we have great. faith. We have confident hope for their future. They seek, as they told us, trade in preference to aid. They do not seek charity. I therefore sincerely beg Her Majesty's Government to do everything they can to tackle the main problem, and that is to secure an international agreement on stable cocoa prices.

2.45 a.m.

Photo of Mr John Tilney Mr John Tilney , Liverpool Wavertree

I must declare an interest as a director of a company which trades both in and with Ghana, that country of pleasant people where I have many fiends, a country naturally richer than any purely African country south of the Sahara. It is an independent Common-wealth country and I would not wish to go in detail into what are its private affairs. We are all guilty at times of spending not all that wisely, and if banks suddenly foreclosed on individuals, companies or countries we might all find ourselves in a difficult situation.

I hope that Her Majesty's Government may be able to meet some of the points so very sensibly raised by my hon. Friend the Member for Bournemouth, East and Christchurch (Mr. Cordle). Private enterprise, of course, has been hit in Ghana by import rationing and heavy taxation, but so might it be by the Little England, anti-developing Commonwealth aspect of our recent Budget. My hon. Friend is perfectly right when he lays emphasis on cocoa. I remember the Korean boom in cocoa when it reached nearly £500 a ton. In 1954 the average price was £467 10s. The drop in price has been really staggering. Only a few months ago it was over £200. Now it is under £130, and that in depreciated £s. Therefore, whatever Her Majesty's Government can do to get the Western world to help in this cocoa crisis I believe not only Ghana but other countries in the developing world would be extremely grateful.

Unfortunately we cannot very easily have a Commonwealth cocoa agreement. The Commonwealth Sugar Agreement has enabled the West Indian islanders and others to hold their heads high, but we take no more than 7½ per cent. of the world cocoa production. Therefore, if we can get our friends in Europe and the United States and the U.S.S.R. to come into some worldwide agreement, we will do much to prevent not only Ghana but Western Nigeria from suffering.

The Finance Minister of Western Nigeria was reported as saying in his Budget speech not long ago: Consumer countries were bent on exploiting the poverty and scanty resources of producer countries to their own advantage. Let us show that this is untrue. My hon. Friend referred to the fact-finding mission which was reported in the dispatch from Washington in The Times of yesterday. I hope that if the International Monetary Fund is to be called upon to help, Her Majesty's Government will try to support it to the full.

2.50 a.m.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

I am grateful to the hon. Member for Bournemouth, East (Mr. Cordle) for indicating some of the themes that he was going to follow in his speech. I cannot, however, endorse many of the remarks that he has made about the domestic policy of the Government of Ghana. It is a tradition of this House that we should exercise self-restraint in discussing the domestic affairs of other countries. Most hon. Members opposite would refrain from criticising in this House the internal affairs of Peru, France or the United States. The hon. Member for Bournemouth, East has, upon this occasion, raised many matters which are solely the domestic concern of the Government of Ghana. Such remarks can have most unfortunate consequences upon Ghana's relations with this country. A Commonwealth country whose domestic affairs are discussed in this way in this House is given the impression that one of the results of membership of the Commonwealth is that it is criticised by hon. Members in a way in which it would not be criticised if it were a foreign country. I hope, therefore, that the speech of the hon. Member does not create this impression.

Having said that, however, I think that the House is fully entitled to concern itself with matters affecting British interests in other countries, whether they be inside or outside the Commonwealth. I therefore welcome those passages in which hon. Members opposite drew our attention to the difficulties of British businesses operating in Ghana and of British exporters in Ghana. The immediate cause of these difficulties is Ghana's acute balance of payments problem. There is no doubt that her difficulties have been exacerbated by her decision, in co-operation with other members of the Cocoa Producers Alliance, to refrain from selling her cocoa for several months. The attempt to hold up prices by this means failed and the producers resumed selling in February, but one effect has been that Ghana is only now receiving from abroad income which otherwise she would have received several months earlier.

Both hon. Members have referred to the importance of cocoa to the economy of Ghana. It is true that the Commonwealth produces more than half of the world's cocoa, but this country consumes only about 10 per cent. of world production and we are not able to exercise a major influence over world market prices. That is one of the facts of life that we must face. An agreement on the lines of the Commonwealth Sugar Agreement would not be practicable, because Britain consumes a much smaller proportion of Commonwealth exports of cocoa than she does of their exports of sugar. Only an international as distinct from a Commonwealth agreement in respect of cocoa could give Commonwealth cocoa producers a useful measure of reassurance. The British Government greatly regret the failure in 1963 to arrive at a satisfactory international cocoa agreement.

Turning to British economic interests in Ghana, British exporters to Ghana have been faced with difficulties both in securing payment for past exports to Ghana and in obtaining import licences and exchange authorisations for further exports. The British Government fully recognise that these exporters have reason to be dissatisfied with Ghana's administrative procedures. Among the valid criticisms which have been made of the Ghanaian procedures are the cumbrousness and uncertainty of the licensing arrangements. Britain has been a major supplier in the past of Ghana's imports and is therefore one of the main sufferers by these arrangements and from the deliberate policy of the Ghana Government in seeking to shift the pattern of its external trade in favour of the countries of Eastern Europe, with whom she has negotiated barter agreements. We have also been disturbed in recent weeks to learn of an increasing tendency to discriminate in favour of Ghana shipping and the Ghana Insurance Corporation to the detriment of British interests in these two industries.

Hon. Members will want to know what the British Government are doing to help in this situation. The British Government have been giving all the help they can to British exporters and British firms operating in Ghana. First, I would mention that the Board of Trade is always prepared to advise exporters about the facts of the situation in a country overseas. Moreover, the facilities of the Exports Credit Guarantee Department continue to be available to British exporters for normal short-term cover. E.C.G.D. have been particularly helpful to British exporters in meeting all requests for cover up to 180 days. British exporters who do not take advantage of the facilities and advice which E.C.G.D. have to offer have largely themselves to blame if they are unable to secure any money for their goods. E.C.G.D. make a very valuable contribution. I am sure that the hon. Member for Liverpool, Wavertree (Mr. Tilney), with his experience in my present office, will readily agree with me on that.

Secondly, the British High Commissioner in Accra has made clear to the Ghana Government our concern about difficulties British exporters are facing in securing payments from Ghana. Our High Commissioner's Office has received in the last 15 months more than 370 complaints from British firms and has actively pursued these cases with the Ghana Government. Unforunately, owing to the severity of the shortage of foreign exchange, these representations have not been successful so far in about half of the cases, but we have every expectation of an improvement in the situation shortly. In the last few days there has been an announcement by the Ghana Government which indicates that, with the inflow of foreign exchange resulting from the resumption of cocoa sales, it is hoped to be able to clear up within the next few weeks the greater part of this outstanding short-term debt. I am sure that this will be very welcome news to hon. Members.

By this means it appears likely that Ghana will succeed within the next few months in overcoming her immediate need for cash to meet immediate demands for foreign exchange. But Ghana is faced with having to find this year and in future years very large sums of foreign exchange to meet the annual servicing of her medium-term debt. If her medium-term difficulties cannot be overcome she will face further short-term cash difficulties such as she has faced recently.

The British Government have, therefore, advised the Ghana Government that the proper course was for the latter to approach the International Monetary Fund because the problem was too big to be faced by Britain or by another single country in the West on its own. I am happy to learn that the Ghana Government have accepted this advice and that a mission from the Fund will be visiting Ghana shortly.

As friends of the people of Ghana, whom we admire as hardworking and industrious partners in the Commonwealth, we feel sure that this is the right and proper course for Ghana to follow. We feel sure that she will receive from the International Monetary Fund, the best possible advice upon what she needs, to do to overcome her current difficulties, and we are confident that if that advice is heeded the way ahead will be clear for her to achieve the great economic potential we all know her to possess.

Question put and agreed to.

Adjourned accordingly at two minutes to Three o'clock a.m.