Tuesday, February 20, 2024

Slight economic slowdown for Ghana from boisterous start in 2023

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Increasing warehousing and transportation capacity combined with decreasing prices in both metrics are driving an economic slowdown in Ghana.

The data are revealed in the Ghana Logistics Managers Index report for the second quarter 2023, which the Center for Applied Research and Innovation in Supply Chain – Africa (CARISCA) released.

The LMI measures the growth or decline of Ghana’s logistics industry, giving managers, policy makers and analysts a reliable data tool for evidence-based decision making. The LMI is based on eight key components: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, transportation capacity, transportation utilization and transportation prices.

The LMI for the second quarter (64.2) decreased by nearly three points from the first quarter’s 67.1. Any score above 50, however, indicates that logistics activities are expanding. A reading below 50 would reflect a contraction.

“The Ghana LMI is still in growth mode,” said Emmanuel Quansah, co-author of the LMI report. “Nevertheless, growth is at a decreasing rate, with the current economic situation in the country not stable enough to generate increasing growth and optimism among industry players.”

Inflation has begun an upward trend, Quansah noted, and the appreciation of the cedi against the dollar in the first quarter has been lost, with the dollar gaining against the cedi.

The LMI summarizes the survey responses of supply chain and operations managers from multiple industries in Ghana. Researchers collected data for the second quarter report from April to June 2023 from 424 respondents.

In addition to being asked about current logistics activities, respondents are asked to predict movement in the LMI over the next 12 months. For the first time, respondents have predicted a future LMI (64.5) that is almost the same as the current score. They are slightly less optimistic than in the first quarter, when they predicted the LMI would rise to 69.3.

“This forecast paints a picture of mixed optimism in the market due to the country’s current macroeconomic state,” said Quansah. “The hopes of a quick turnaround in the Ghanaian economy after the country secured the $3 billion IMF credit facility early this year remains to be seen in the marketplace.”

The predictive nature of the LMI is clearly seen in the second-quarter results, Quansah added. Even though the LMI measures changes in logistics activities, it is highly reflective of the economy as a whole.

The calculated LMI for Ghana, along with the analysis of its components, is intended to provide useful insights for the government of Ghana, business decision-makers, market analysts and investors. The tool is the first of its kind in Africa. The Ghana LMI is based on the U.S. LMI, which was created in 2016 by a team led by CARISCA Executive Director Dale Rogers.

“The Ghana LMI helps us with our current strategy to achieve our KPIs,” said Thomas Yeboah, logistics manager for the World Food Program in Ghana and an LMI respondent. “The trends and projections from the LMI guide the alignment of our logistics plans.”

In addition to a detailed overview of the survey findings, each Ghana LMI report includes observations from the researchers, predictions and charts and tables that display the data at a glance. It also includes an electronic payment systems index (EPI). This index gauges the views of respondents on the usage of electronic payment systems when transacting business with suppliers and customers.

Electronic payment systems reduce processing times and errors, and they improve convenience, tracking, transparency, efficiency and security. The EPI for the second quarter of 2023 registered a value of 72.9. This score is an increase of 5.9 points from last quarter.

The Q2 2023 report, the sixth LMI report to date, offers several new features. These include: more detailed perspectives on each of the three primary components studied (inventory, warehousing and transportation); a comparison of manufacturing vs. service sector activities; and quotes from respondents on challenges they face and the value of the LMI.

CARISCA plans to replicate the tool in other African countries, beginning with Kenya in 2024. The researchers are looking for partners to help expand the LMI across the continent.

CARISCA is a partnership between Kwame Nkrumah University of Science and Technology and Arizona State University, with support from the United States Agency for International Development. The centre at KNUST aspires to become a globally recognized, locally owned hub for generating and translating innovative research into positive development outcomes for Ghana and pan-African supply chains, driving country self-reliance.

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