Ghana’s quest for economic transformation hinges on its ability to boost productivity, particularly in the informal sector, according to Dr. Nii Moi Thompson, Economist and Chairman of the National Development Planning Commission.
Speaking on the Citi Breakfast Show, Dr. Thompson noted that Ghana’s low productivity levels are a major obstacle to economic growth, with the country’s productivity standing at around $5 or $6 per hour worked.
“Every time we talk about the informal sector, the first thing that comes to mind is taxes. There is a segment that should be paying taxes but is not paying. However, a vast majority of them are below the threshold for paying taxes,” Dr. Thompson explained.
He emphasized that the low productivity levels in the informal sector are due to a combination of factors.
“Precisely because skills are low, capital per worker is low; all these combined means that the value added per worker there is very low. That is what actually brings down the overall productivity for Ghana,” Dr. Thompson stated.
To address this challenge, Dr. Thompson emphasized the need for policies that formalize the informal sector, which dominates Ghana’s economy.
“Part of the reason why it is so low for Ghana is the dominance of the informal sector. So, formalization should actually be an explicit objective of policy for any transformation agenda. But unfortunately, as you rightly said, we often think of it only in tax terms. If you work them to improve productivity, it goes up, right away the taxes will also go up,” he added.
Dr. Thompson also highlighted the need to address Ghana’s educational gap, which he described as a major hindrance to economic growth.
“I was reading a report that stated that 20% of our labour force has no formal education and another 54% have up to JHS education. So, we are looking at 2/3 of the labour force, for all intended purposes, is not suitable for our modern economy,” he noted.