The Dark Side of Rapid Digitalization in Ghana That Dr. Bawumia Might Have Overlooked: Digitalization’s Threat to the Cedi

Vice President Dr. Mahamudu Bawumia recently extolled the virtues of digitalization, highlighting its transformative potential for modern economies. At the launch of GoRide, a digital platform for Ghanaian taxi drivers in Accra, Dr. Bawumia passionately argued that embracing the digital revolution is not optional but imperative. He warned that nations unwilling to ride the wave of the Fourth Industrial Revolution risk being left behind.

In his speech, Dr. Bawumia pointed to global digital giants as proof of the economic power of technology. Comparing Uber’s valuation of $163 billion to Ghana’s $75 billion economy, he emphasized how a single app can outperform entire nations in value. “Sometimes people don’t quite get what we are doing,” he noted. “They say, ‘Oh, the Vice President is launching an app,’ and question what that has to do with the economy.”

While Dr. Bawumia’s enthusiasm for digitalization is commendable, he seemingly overlooked a crucial aspect of this transformation—the unintended consequences for Ghana’s local currency, the Cedi. Rapid digitalization, while beneficial in many ways, has its pitfalls. One of its hidden costs is the increasing pressure on the Cedi, driven by the rising consumption of imported goods, the dominance of foreign-owned tech platforms, and the repatriation of profits by these companies to their home countries.

The Currency Trap of Digitalization

The rapid proliferation of ride-hailing apps such as Uber, Bolt, and Yango in Ghana illustrates a double-edged sword. These platforms have undeniably brought convenience and efficiency to transportation, but their ownership structure tells a different story. Uber, based in the USA; Bolt, from Estonia; and Yango, owned by Russian tech giant Yandex, all funnel their profits out of Ghana.

Similarly, the boom in e-commerce platforms has further deepened this challenge. Popular items sold online in Ghana, such as smartphones, laptops, and household appliances, are predominantly imported. According to GoodPapa.com, the top-selling products on Ghanaian e-commerce platforms heavily rely on foreign manufacturers in America, South Korea, Japan, China and Europe. As Ghanaians spend more on these goods, the demand for foreign currencies rises. This outflow of foreign currency exacerbates the depreciation of the Cedi, a trend that continues to make imports and everyday goods more expensive for Ghanaians.

Again, everyone in the New Patriotic Party Government hails the successful rollout of the Mobile Money Interoperability program. And to be honest, Mobile Money Interoperability has been instrumental in making payments for goods and services across platforms very flexible and convenient. But here is the seeming dark side to Mobile Money Interoperability scheme – it’s partial contribution to the depreciation of the Cedi. How? Mobile Money Interoperability has been contributing significantly to revenue generation by the various telcom companies like MTN, Telecel, AirtelTigo. In fact, Mobile money today is a major component of the revenue streams for the various telcom companies in Ghana. And it is an open secret that these telecom companies are not owned by Ghanaians but are foreign companies that repatriate their profits to their home countries. They need foreign currencies to repatriate their profits abroad. And the more they make from the general public through the introduction of such flexible payment systems like the mobile money interoperability, the more proceeds they would need to repatriate to their owners abroad, meaning they would need more pounds, dollars, Euros etc, hence another source of pressure on the Ghana Cedi fueled by rapid digitalization.

Unbalanced Growth: The Missing Local Production

Under the current government, rapid digitalization has been celebrated as a solution to inefficiencies in sectors like business, healthcare, and education. However, this digital transformation has not been matched with investments in local production or the development of homegrown technologies. As a result, Ghana’s economy remains largely dependent on foreign goods and services, making it vulnerable to external economic pressures.

A Way Forward: Investing in Local Innovation

To mitigate the adverse effects of digitalization, Ghana must recalibrate its approach. The incoming government has a unique opportunity to prioritize investments in local innovators and manufacturers. Supporting startups and small businesses with tax incentives, subsidies, and funding can empower Ghanaians to create solutions tailored to local needs.

For example, fostering a robust tech ecosystem led by private innovators, not just state agencies, can reduce reliance on foreign platforms. Ghana needs locally owned ride-hailing apps, e-commerce platforms, and digital payment systems that retain revenue within the country. By doing so, the nation can build a sustainable digital economy that strengthens the Cedi rather than undermining it.

Policy Reforms for a Sustainable Digital Economy

To achieve this vision, policies must:

Encourage local entrepreneurship: Provide funding and resources for Ghanaian tech startups.
Incentivize local production: Offer tax breaks for companies manufacturing goods domestically.
Promote research and development: Establish partnerships between the private sector and educational institutions to drive innovation.
Regulate foreign dominance: Implement measures to ensure foreign companies operating in Ghana reinvest a portion of their profits locally.

Conclusion

Rapid digitalization holds immense promise for Ghana and other African nations, but it comes with significant risks, especially the depreciation of local currencies like the Ghana Cedi.

Without a strategic focus on local production and innovation, the digital revolution could erode the value of local currencies and widen economic disparities.

As Ghana embraces digitalization, it must do so on its own terms—by empowering its citizens to become inventors and innovators, not just consumers.

Rapid digitalization truly stands to benefit a nation in every aspect only when its citizens are the inventors and innovators of the major technologies the world needs and not when its citizens are largely mere consumers or not when a nation only try to blindly copy what advanced nations are doing in the digital ecosystem.

Author: Melvin Tarlue is a journalist and seasoned digital marketing professional (author’s email: tarluemelvin12@gmail.com)