Transcript CDH’S THE HEART REPORT

THE
INTERMARKET
YEARBOOK
2014 / 2015
CONTENT
The Intermarket Research Yearbook highlights key
issues in Ghana’s economy and the stock market
with a view to presenting a summary account of
the preceding year, while looking forward to the
year-to-come. It is put together by the research
arm of Intermarket Group; a financial Services
Company in Ghana operating in the savings and
loans, asset management, stock brokerage,
corporate advisory, commodities trading, shortterm finance, and insurance segments of the
economy.
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Foreword
Ghana’s Political Scene
Economic Review
Stock Market Performance
Special Reports & Insights
News Highlights of the Year
FOREWORD
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Significant risks to the global economy has
arisen from deflationary fears in Europe and
Japan; steep price declines in oil and gold arising
from geo-political issues and faltering growth in
China. With an increasingly globalised world
economy, these developments are expected to
have important consequences for the sub region
and Ghana.
Ghana’s economy in 2014 was itself bedeviled by
hyper currency depreciation in the first three
quarters of the year; only easing in the final
quarter due to the country’s successful third
Eurobond offer and receipts from the forward
sale of cocoa. The shortfall of electricity
generation persisted from 2013 into 2014 and
affected economic activity resulting in a
slowdown in growth from 7.2% in 2013 to a
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projected 6.9% in 2014. The fiscal deficit
remained in the double digits in 2014 with the
total government debt stock edging above 60%
of the country’s Gross Domestic Product (GDP).
These have prompted rating agencies such as
Standard’s & Poor’s and Fitch to downgrade the
country’s debt.
In the face of these economic challenges, the
government is currently seeking funds support
from the International Monetary Fund (IMF) and
though discussions are still on-going, there are
indications that the traditionally austerity-leaning
policies of the IMF will dominate the economic
governance regime in 2015. This will include
revenue generation measures such as the recently
announced 17.5% Special Tax on Petroleum and
the Value Added Tax on Financial Services.
Government is also expected to rein in its
expenditure and this is expected to result in the
low growth projections for 2015 of 3.9% (2015
Budget Statement).
However, despite the short term economic
difficulties that are anticipated for 2015; Ghana’s
medium to long term prospects are very bright.
The recent commencement of production of the
Atuabo Gas Project and the continuing
development of the TEN oil and gas fields
represent a significant addition in terms of the
country’s gross domestic product, energy
sufficiency and current account balance. Ghana’s
status as an island of political stability and
important investment destination in the fastdeveloping sub-saharan African region is also a
critical factor that could help lift the country
from its economic doldrums as early as the
fourth quarter of 2015.
POLITICS 2015
GHANA’S POLITICAL SCENE
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Political activity has not quieted despite the end
of the official electoral period after the decision
by the Supreme Court in 2013 concerning the
election petition brought before it by the
opposition New Patriotic Party (NPP). This fervor
is expected to persist into 2015 and could result
in a quite volatile political climate in 2016. This
is however, not expected to escalate into a major
conflict situation in the country or threaten the
relatively established democratic structures of
Ghana.
•
The major political parties, the National
Democratic Congress (NDC) and the New Patriotic
Party (NPP) have conducted their internal
elections for polling stations, constituencies,
regional, national executive officers and a flag
bearer; with the exception of the expected
acclamation of the sitting president, John
Mahama as the flag bearer for the NDC.
•
The 2016 elections will therefore be a replay of
the battle in 2012 between President John
Mahama and Nana Addo Dankwa Akufo Addo.
There is the expectation that 2015 will see
strategic positioning by the two parties to
present themselves as the party ready to govern
the country beyond 2016. The issue of a ‘secondterm’ will be crucial as Ghanaian voters are
more likely to retain Mr. Mahama if they view
2016-2020 as his second term as President
rather than the third term of the NDC.
SPECIAL REPORT – Ghana in the
2014 Global Competitiveness Report
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The
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Ghana was ranked 111th out of 144 countries
in the 2014 Global Competitiveness Index
published by the World Economic Forum (WEF).
Ghana ranked 114 in 2013. Below are the
areas the country did well and also the sectors
which need improvement and are important
policy issues to consider as we enter the
The
electioneering period.
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country’s best performances are in;
3.
Intellectual Property Protection
4.
Judicial Independence
5.
Wastefulness of Government Spending
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Efficiency of Legal Framework in Settling
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Disputes
8.
Strength of Investor Protection
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Quality of Management Schools
10.
Extent of Market Dominance
11.
Effect of Taxation on Incentives to Invest
12.
Total Tax rate as a % of Profits
13.
Effect of Taxation on Incentives to Work
14.
Women in the Labour Force
15.
Financing through Local Equity Market
16.
Venture Capital Availability
17.
Legal Rights
18.
Nature of Competitive Advantage
19.
Capacity for Innovation
20.
Corporate Spending on R&D
country’s worst performances are in;
Business Costs of Terrorism
Organised Crime
Quality of Overall Infrastructure
Quality of Electricity Supply
Fixed Telephone Lines
Government Budget Balance
Inflation
HIV Prevalence
Infant Mortality
Life Expectancy
Quality of Primary Education
Secondary Education Enrolment
Internet Access in Schools
Intensity of Local Competition
Prevalence of Trade Business
Burden of Customs Procedures
Flexibility of Wage Determination
Redundancy Costs
Individuals using Internet
Fixed Broadband Internet Bandwidth
THE ECONOMY
ECONOMIC REVIEW
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On the economic front, a number of factors
including a steep depreciation in the cedi, high
interest rates and increases in utility and fuel
prices in the domestic economy have raised the
general cost of living and inflationary pressures
and affected business and consumer confidence
for most of 2014. Economic performance, as
measured by growth in the Gross Domestic
Product (GDP), however was relatively robust and
the medium-term prospects of the country are
•
bright.
Recent Economic Developments
The economic challenges of the country in 2014,
though short term in nature, are important
considerations for any business activity. These are
further enumerated below:
•
High Budget Deficits – There was a record
budget deficit in 2012 of 11.5% of GDP. The
figure for 2013 was 10.1% with a provisional
2014 deficit of 9.5% of GDP (GHC 10.9 biliion).
Inflation on the Rise –End Inflation rate for
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2013 was 13.1%, above the single-digit target
set by the Bank of Ghana. November Inflation
for 2014 was 17%.
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Depreciation of the Cedi – The Cedi depreciated
by an average of 12% against major trading
currencies in 2013. Depreciation in 2014 was
almost 30%.
High Public Sector Wages & Labour Agitations –
Public Sector Wages for 2014 is projected at
GHC 11 billion or 70% of non-earmarked tax
revenues. Further efforts by Government to
control the impact of this recurrent expenditure
in 2014-2015 are expected to result in more
labour disputes and agitations.
High Public Debt & Interest Payments – Public
Debt is currently at $21.70 billion (60.8% of
GDP). Total Interest Payments for 2014 is
projected at GHC 7.8 billion (22% of Total
Expenditure)
The Issue of Unemployment – Youth
unemployment remains a big issue for
government to address.
Energy – The shortfall in Ghana’s electricity
generation has persisted for three years now and
is undermining the manufacturing sector and
general economic growth.
ECONOMIC REVIEW(2)
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Structure of the Economy
Ghana is a lower middle income economy with a
GDP per capita of about US$1,900. The sectoral
distribution of Ghana's GDP are as follows:
services (50%), industry (30%) and agriculture
(20%). However, in terms of workforce, the
agricultural sector employs more than half of the
workforce (55%), being mainly small landholders.
The services sector employs 30% of the total •
labour force while industry absorbs 15%.
Headline Inflation - Headline inflation rose from
13.80 per cent in January 2014 to 17 per cent
in November, 2014. The increase during the year
was driven by a variety of factors; depreciation
of the cedi, rising fuel prices at the pump,
transportation price hikes, increase in utility
prices by over 100 per cent and the impact of a
much weaker fiscal stance. Looking ahead, the
inflation projections show that inflationary
pressures are likely to persist for the first
quarter of 2015 but will begin to taper-off from
the second quarter, bringing down inflation
towards the target ranges of 10 to 12 per cent
by close of 2015.
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Interest Rates - The Bank of Ghana policy rate
increased to 21.0 per cent in October 2014
from 16.0 at the beginning of the year in
response to underlying inflationary pressures. The
interest rate on the 91-day Treasury bill rate for
December 2014 is 25.81% (19.22% in January,
2014). Similarly, as at December 2014, the rates
on one-year and two-year fixed notes stood at
22.50% (17.00% at the end of December 2013)
and 23.0% (16.80% at the end of December
2013) respectively. We expect further depreciation
in the interest rates in 2015 to between a range
of 15% - 18%.
Performance of the Ghana cedi - On the
currency market, the Ghana cedi posted
significant losses against its major trading
currencies for the first three quarters of 2014.
The depreciation of the Ghana cedi was caused
by intense demand pressures for foreign
exchange, fuelled by strong import demand and
premature redemption of portfolio investments by
non-residents. By August 2014, the Ghana cedi
has depreciated on the interbank market by
29% against the US dollar year-to-date. During
the same period, the Ghana cedi depreciated by
29% and 26% against the pound sterling, and
euro respectively. There was however, some
stability at the end of the year and this will
persist in 2015.
Gross Domestic Product (GDP) - GDP growth
slowed from 7.9% in 2012 to 7.1% in 2013.
Provisional data from the Ghana Statistical
Service (GSS) indicated GDP growth of 6.7% for
2014. Growth figures for 2015 are projected at
3.9%
2015 BUDGET HIGHLIGHTS
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The 2015 Budget Statement was presented under •
the theme; “Transformational Agenda: Securing the
Bright Medium Term Prospects of the Economy”.
The following are summaries of major issues and •
policies outlined in the statement;
Government’s clearing of all outstanding arrears •
on the Single Spine Salary Structure (about GHC
3 billion)
Completion of Ghana Gas pipelines and
processing plant to exploit 200 billion cubic feet •
of gas from the Jubilee fields
Plans to issue energy bonds that draw on
synergies among the Balance Sheets of capable
State Owned Enterprises (SOEs) and the private
sector. There is therefore a possibility of a
second line of longer term Cocoa Bonds by
COCOBOD to fund its long term capital and
infrastructure needs
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The takeover of Ghana National Gas Company by
GNPC to create a gas subsidiary for the latter.
Also the possibility of further consolidation
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involving TOR and BOST.
Implementation of the remaining VAT measures
for fee - based financial services and commercial
real estate with a change in the VAT on real •
estate to a flat 5 percent
Imposition of Special Petroleum Tax of 17.5
percent as part of a rationalization of VAT
regime and change in the petroleum pricing
structure, including a reversal of excise tax on
petroleum from ad valorem to specific
Extension of the National Fiscal Stabilization Levy
of 5 percent and special import levy of 1-2
percent to 2017
Increase the withholding tax on Directors’
remuneration from 10 percent to 20 percent.
Cap on the Ghana Stabilisation Fund revised to
a moving cap, beginning with US$300 million
from January 1, 2015 and, rising to a maximum
of US$400 million during the year.
Remove VAT on specified locally produced
pharmaceuticals and some of the raw materials
used for the production of these pharmaceuticals.
Government will also remove import duty and
VAT on inputs for the production of machetes
and also the production of exercise books and
textbooks. Import duties on smartphones will be
removed.
Operationalize the Sinking Fund to manage the
orderly redemption of Sovereign Bonds and other
debt instruments
The Ghana Infrastructure Investment Fund is to
begin effective operations in 2015 after the
announcement of the Board and Advisory Council
members.
Creation of a Ghana Export-Import Bank to lead
in the strategic positioning of Ghana as an
export -led economy.
2015 BUDGET HIGHLIGHTS
Indicators
Real GDP Growth (inc. oil)
Real GDP Growth (non oil)
Nominal GDP (GHC)
Agriculture Sector
Industry Sector
Services Sector
Inflation
Broad Money Supply (M2+, Growth)
Credit to the Private Sector (Growth)
US Dollar/Cedi
Pound/Cedi
Euro/Cedi
Trade Deficit
Balance of Payment Deficit
Gross International Reserves
Fiscal Deficit (% of GDP)
Public Debt Stock
Public Debt (% of GDP)
Total Revenue & Grants
Total Expenditure & Arrears
2014
6.9%
6.2%
110b
5.3%
4.6%
4.6%
16.9%
33.6%
50.6%
31.19%
29.32%
23.63%
$681.3m
$699.7m
$5.68b
9.5%
$21.73b
60.8%
GHC 25b
GHC 32b
2015
Projections
3.9%
2.7%
131b
2.9%
5.2%
3.9%
11.5%
n.a.
n.a.
n.a
n.a.
n.a.
n.a.
n.a.
n.a.
6.5%
n.a.
n.a.
GHC 32b
GHC 39b
INSIGHTS
&
SPECIAL REPORTS
INSIGHT
–
Prince
Abbey (Head,
Research)
Intermarket
G h a n a ’s E c o n o m i c C h a l l e n g e s i n 2 0 1 4
The Issues & Solutions
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HOW WE GOT HERE:
GOVERNMENT’S BORROWING
It is important that in prescribing possible
solutions to our economic malaise, we first try to
decipher the root cause of the problems. This is
important, firstly, because it enables better
recommendations suited to our particular
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circumstances and secondly, because it could help
prevent this from happening again.
The issue of government’s borrowing has tended
to be a hotbed of political dispute and hence a
murky area to debate. We however, believe this
to be a classical economic problem that, not
only is it not a problem unique to this
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administration; but that it is not even a uniquely
Ghanaian problem. It is inherent in the nature of
financial stability in that ‘Stability breeds
Instability’. This is described by Hyman Minsky (a
prominent American Economist) as being about
how the non-government sector causes financial
instability by moving from hedge borrowing to •
speculative borrowing and then to ‘ponzi’
borrowing.
Hedge borrowing is when the borrower is
capable of paying both the principal and interest
of the debt from current cash flow generated by
investments. Speculative borrowing is when the
cash flow can cover the interest payments but is
unable to pay for the principal. The last stage is
‘Ponzi’ borrowing where the borrower is aware
that his current cash flow from investments is
unable to cover either the principal or the
interest on the debt. When there is a certain
critical mass of ponzi borrowers in an economy,
then financial crisis becomes imminent.
This analogy is well applicable in the case of
governments; when as in the case of Ghana,
borrowing is done not based on the present
ability to pay back the principal and interests on
the debts; but rather premised on anticipated
revenue inflows from our main export
commodities; Cocoa, Gold and Oil.
This means that in the years that the global
commodities markets are unfavorable to our
traditional exports, there is a severe shock to
the economy, resulting in the nation becoming
cash-strapped; a depreciation of the cedi and a
galloping increase in prices of goods and
services.
Though it can be argued that this phenomenon
is not peculiar to Ghana; our intense and
partisan political atmosphere has exacerbated an
already difficult situation and resulted in very
rapid business cycles, which can be termed as
‘political-economic cycles’ of 4 and 8 years.
G h a n a ’s E c o n o m i c C h a l l e n g e s i n 2 0 1 4
The Issues & Solutions
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Government tends to spend heavily on capital
projects in election years; raking in huge budget
deficits that are mostly financed by debt. In the
situations where revenue inflows miss the mark
as in 2012-2013; government suddenly has very •
little room to maneuver and the hang-over from
the debt binge results in a major economic
headache.
This analysis lays the foundation to now look at
some possible solutions in the short-term.
However, as a postscript, it is possible to address,
fundamentally, this recurring problem of
government borrowing by separating the
functions of government between capital
expenditure and recurrent expenditure.
This means that recurrent expenditure such as
the statutory funds and workers’ compensation
will remain a function of the current structure of
government finance and will be discharged solely
from revenues that accrue to government in the
year. Capital expenditure, on the other hand, will
no longer be financed directly from government
revenues; but rather a combination of a special
tax; such as the Infrastructure fund tax out of
VAT, and private investments. This new system of
implementing capital projects can be overseen by
an Economic Council; comprising the
Government’s Economic Management Team,
National Development Planning Commission and
representatives from Parliament. The institutional
framework must be built to edge out any
semblance of partisanship in deciding capital
projects, and spending must be strictly restricted
to whatever funds have been raised.
This Council will also help prevent the
arbitrariness of capital project implementation
across the country and could result in a more
holistic approach that could significantly
transform the country.
The Solutions Ahead
 Recommendations of the Senchi
Report (Page 15)
 Building the Institutions to
Manage Ghana’s Economic
Transformation (Page 16)
 Energizing Economic Growth in
Ghana: World Bank’s Report on the
Power Sector (Page 20)
 A Brief on the Economic
Partnership Agreement (Page 22)
 Ghana as a Commercial
Economy (Page 26)
SPECIAL REPORT –
Recommendations of the ‘Senchi Report’
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Government should use its leverage as the
largest borrower to influence interest rates
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downwards
Pension funds could provide long-term finance for
infrastructure development. The role of the
•
pension funds subsector should therefore be
critically examined and appropriate legislation
introduced to leverage resources in the sector for
growth-oriented projects.
A national vision should be anchored in selected •
high-impact flagship programmes and projects in
which the country can develop comparative and •
competitive advantages. The following may be
considered:
Building key infrastructure projects, such as
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highways, ports, ICT backbone
An integrated petroleum sector (oil and gas);
Agricultural transformation with special emphasis
on agro-processing, cocoa processing, and exports;
Efficient exploitation and value addition of the
extractives industry (the non-oil industry).
Minerals – (e.g. bauxite and iron ore);
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Tourism development
Government subsidies should be made efficient,
structured and targeted
The number and functions of statutory funds
should be reviewed with a view to prioritising
and rationalising them and, subject to the
applicable legal and administrative considerations,
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aligning their use with the priorities of the
national budget.
There is the need to review the Pensions Act to
allow the investment of pension funds in longterm investments such as electricity.
Substitute blanket input subsidies such as
tractors and fertilizers with the provision of
guaranteed prices for some selected goods that
can be produced on a large scale, as happens in
the case of cocoa, for instance.
Industry should not be made to subsidise
residential usage of power.
Municipal bonds need to be quickly introduced
and used in a manner that they are not part of
the central government debt.
Bank of Ghana should accelerate the automation
of forex bureaux operations; Enforce already
existing rules and regulations and enhance the
supervision of the forex bureau segment of the
market; and Review the licensing regime of forex
bureaux by increasing minimum capital
requirements.
Regulators should be made to make listing on
the Ghana Stock Exchange a licensing
requirement for all commercial banks,
telecommunication companies, insurance
companies and mining companies. This will
enable us to improve on the stability of the
local currency, as not all the profits will be
transferred outside the country as dividends.
SOLVING ‘SENCHI PROBLEMS’ WITH
INSTITUTIONS–
Building the Institutions to Manage
G h a n a ’s E co n o mi c Tr a n s f o r ma t i o n
Depreciation of the Currency:
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One of the main issues raised by the Senchi
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Consensus was the lack of policy credibility in
managing the fundamentals of the macroeconomy., hence the need for institutions.
In this regard, we first recommend the setting up•
of a National Currency Board to regulate the
country’s foreign exchange market and manage
the Cedi. A Currency Board is a monetary
authority that makes decisions about the
valuation of a nation's currency, specifically
whether to peg the exchange rate of the local
currency to a foreign currency, an equal amount
of which is held in reserves. The currency board •
then allows for the unlimited exchange of the
local, pegged currency for the foreign currency.
GHANA CURRENCY BOARD
A currency board can only earn the interest that
is gained on the foreign reserves themselves, so
those rates tend to mimic the prevailing rates in
the foreign currency.
The value of this system is that questions of
currency stability no longer apply. The drawbacks
are that the country no longer has the ability to
set monetary policy according to other domestic
considerations, and that the fixed exchange rate
will, to a large extent, also fix a country's terms
of trade, irrespective of economic differences
between it and its trading partners.
Specifically in Ghana’s case, currency boards have
advantages for our small and open economy
which already find independent monetary policy
difficult to sustain. Currency Boards can also
form a credible commitment to low inflation.
Building the Institutions to Manage
G h a n a ’s E c o n o m i c Tr a n s f o r m a t i o n
Fiscal Indiscipline:
GHANA ECONOMIC COUNCIL
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There is also a concern about addressing
fundamentally the recurring problem of
government’s huge fiscal deficits and borrowing.
We propose that an option to finding a
permanent and realistic solution to this problem
is by separating the functions of central
government between capital expenditure and
recurrent expenditure.
•
This means that recurrent expenditure such as
the statutory funds and workers’ compensation
will remain a function of the current structure of
government and will be financed solely from
•
revenues that accrue to government in the year.
Capital expenditure, on the other hand, will no
longer be financed directly from government
revenues; but rather a combination of a special
tax; such as the Infrastructure & Investment Fund
tax on VAT, and private investments. This new
system of implementing capital projects can be
overseen by an Economic Council; comprising the
Vice President, Government’s Economic
Management Team, National Development
Planning Commission and representatives from
Parliament. The institutional framework must be
built to edge out any semblance of partisanship
in deciding capital projects and spending must
be strictly restricted to whatever funds have
been raised separate from government’s
traditional revenue sources.
This Council will also help prevent the
arbitrariness of capital project implementation
across the country and could result in a more
holistic approach that could significantly
transform the country.
Building the Institutions to Manage
G h a n a ’s E c o n o m i c Tr a n s f o r m a t i o n
Revenue Mobilization:
•
A significant problem for government is the low •
and significantly undiversified tax revenue
sources. This means that government must
borrow to finance, sometimes, not just for capital
expenditure but recurrent expenditure including
interest payments on the loans.
•
The fact that about 70% of Ghana’s economic
activity is in the informal sector means that very
few Ghanaians carry the tax burden and there
was a consensus at Senchi that this class of
Ghanaians feel overtaxed.
•
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An Informal Sector Tax will be a tax on all
registered businesses that market or sell their
products and services through the informal
sector. The tax will be an ad-valorem tax on the
proportion of sales that flow through the
informal channels. Consequently, sales made
through formal channels will escape the tax.
I N F O R M A L S E C TO R TA X
The proposed Informal Sector Tax for Ghana will
have a number of impacts on our economic
fortunes. First, it will increase the revenue in
taxes for government. Secondly, this increase in
taxes will eventually be a tax on the Informal
Sector though it will first be applied on the
Formal Sector, as businesses in the informal
sector would be forced to register their
businesses if they are to escape the effects of
the punitive tax.
Thirdly, this will in effect result in the growth of
the formal sector of Ghana’s economy; improving
productivity and market viability.
Building the Institutions to Manage
G h a n a ’s E c o n o m i c Tr a n s f o r m a t i o n
L o n g Te r m D e v e l o p m e n t :
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NATIONAL MARKETS AUTHORITY
The Consensus noted many structural problems •
with several market systems in our economy
including the financial markets, foreign exchange
markets, money markets, capital markets,
insurance and pension funds and leasing markets.
These markets also feed into the real sector
markets such as agricultural financing, trade
markets and entrepreneurial development.
This role as facilitator will be different from the
traditional regulators of these markets as it will
take a more forward and aggressive approach in
pushing for the key factors of a good market
structure such as Availability of Information,
Liquidity, Low Transaction Costs, and Internal
Competition
•
They will also operate across many different
markets which mean they will be able to adopt
a more holistic approach to creating a developed
Ghanaian economic market that is resilient and
at the same time vibrant, and delivers sound
economic growth even in challenging times
A facilitating body, as in a National Markets
Authority could be set up to address the
identified market imperfections. Their role will be
to make the various markets work for
consumers, businesses and the economy.
SPECIAL REPORT– Energizing
Economic Growth in Ghana: Wor ld
B a n k ’s R e p o r t o n t h e Powe r S e c t o r
•
The focus of this World Bank Report was to
highlight specific policies and decisions that
Ghana’s government needs to take to ensure that
Ghana’s emergence as a middle-income economy
is not held back by the energy sector. Their
recommendation centered on Government making
a concerted effort to “think big” and provide
more direct and proactive leadership to the
energy sector. This report comes on the back of
a decade or so of periodic major energy
disruptions that threatens to derail the years of
economic gains made by the country. A major,
avoidable power crisis in 2006–7 is estimated to •
have cost the country nearly 1% in lost growth
of gross domestic product during those years.
Five years later, Ghana once again was plunged
into power shortages, which also could have been
avoided if lessons from the past had been
learned and decisions taken to ensure that
adequate dual-fuel generation capacity was built.
The present recent power shortages, arising from
maintenance works and a cut-off of imported
gas from Nigeria, could have been mitigated if
Ghana’s own gas from the Jubilee field had been
developed in a timely manner in parallel with oil
production that began in 2010.
The Report identifies two major challenges faced
by the power sector arising from forces external
to the sector: these are the lack of adequate
and secure quantities of reasonably priced fuel
for power generation, and the lack of adequate
public funds to finance the sector’s investment
requirements. These challenges are exacerbated
by the poor technical and financial performance
of the Electricity Company of Ghana (ECG) and
Volta River Authority (VRA), and policies and
practices that seriously damage the financial
health of ECG, VRA and the Ghana Grid Company
Limited (GRIDCo).
SPECIAL REPORT – Energizing
Economic Growth in Ghana: Wor ld
B a n k ’s R e p o r t o n t h e Powe r S e c t o r
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The recommendations of the Report can be
summarized in these 17 points;
Large-scale private-sector investment is essential
to generation.
Power sector subsidies have reached
unsustainable levels.
Performance of ECG, VRA, PURC, and EC needs
improvement.
Natural gas is essential for current and future
power generation.
Gas-based power generation will be much more
expensive than hydro generation, and oil-based
generation will be much more expensive than
gas-based generation.
Energy efficiency and demand-side management
can be much cheaper than thermal generation.
Pay ECG amounts owed by public bodies.
Take over VRA’s short-term debt incurred for
Light Crude Oil purchases.
Appoint top-notch technical adviser on
Independent Power Producers in the Ministry of
Energy.
Formalize GRIDCo’s responsibility for preparing
the indicative medium- and long-terms plan for
power generation requirements.
•
•
•
•
•
•
•
Merge Bui Power Authority with VRA.
Shut down VALCO until generation using Light
Crude Oil ceases, or else the subsidy should be
borne directly by the national budget, not the
power sector.
Reassess the clearinghouse payments mechanism
to institute direct payment of electricity bills by
as many state bodies as possible
Task the Energy Commission to draw up
aggressive energy efficiency and demand-side
management plans in all end-user sectors.
Set professional eligibility criteria for Board
membership of energy sector SOEs.
Recognize that Power generation is the highestvalue use of Ghana’s gas.
Note that delays in the flow of local gas amount
to an additional cost of US$ 1 million a day for
buying light crude oil.
A Background on the Economic
Partnership Agreement (EPA)
•
Over the past few months, the issues on the
Economic Partnership Agreement between Europe
and ECOWAS (Ghana included) have become a
subject of discussion and disagreement among
Ghanaians. While the Government insists that the
benefits of joining the EPA outweighs the
demerits; segments of civil society have insisted
that the Agreement will have huge, irreversible
and negative economic consequences. Below is a
background on the EPAs
•
EPAs are trade agreements covering trade in
goods and services and also ‘behind the border’
issues, such as competition, government
procurement, intellectual property, and trade
•
facilitation. EPAs, according to the European
Commission is to help to improve African
Caribbean & Pacific (ACP) countries’ trade and
business environment, promote growth and
increase ACP’s ‘overall competitiveness’ which will,
in turn, aid their integration into the global
economy (European Commission, 2000: Article 3537).
•
In December 2007, Ghana and the EU initialed
an Interim Economic Partnership Agreement
(IEPA) in Accra, which provides a framework for
trade in goods only between the two parties. The
IEPA was necessitated by the looming deadline
for the previous agreement that governed trade
and aid relations between the ACP countries and
the EU. The previous agreement, known as the
Cotonou Agreement, had been in existence since
2000. The Cotonou Agreement was preceded by
four Lome Accords. These agreements set the
terms for trade between the EU and ACP from
the post-colonial period of the late 1950s up to
2007. A special feature of these agreements was
their being underpinned by the so-called ‘special
relationship’ between the EU and the ACP
Countries, which among other things, sought to
grant ACP Countries preferential access to the EU
market.
The Lome Accords, as well as the Cotonou
Agreement, however violated the WTO rules
regarding Reciprocity which stipulates that trade
agreements between two parties must be
essentially reciprocal, have extended coverage and
not create new obstacles for trade with third
parties. These agreements also violated the
Enabling Clause which allows for more favourable
trade conditions to be applied to a group of
nations defined by economic or development
criteria only. The favourable treatment of ACP
countries provided by the EU through the
preferential guarantees in the Lome and Cotonou
Agreements also contradicts the WTO principle of
‘Most Favoured Nation (MFN) Treatment’.
Economic Partnership Agreement
(EPA)
•
•
Under the WTO agreements, countries cannot
normally discriminate between their trading
partners. When special consideration, such as a
lower customs duty rate for one of their
products is given to a country the same has to
•
apply for all WTO member countries. The EU
countries and most of the ACP Countries are
members of the WTO and are therefore subject
to WTO rules.
Consequently, there was a pressing need to
replace the Cotonou Agreement with a WTO
compatible agreement and the EU proposed the
EPAs as the next best thing that came closest to
the provisions of Cotonou Agreement without
violating the WTO rules. Nonetheless, there was
strong opposition to the EPAs in their original
form, as they covered non-trade issues like
services and investments. This resulted in a
stalemate that would have proved damaging
especially to vulnerable economies within the ACP,
states such as Ghana. The Cotonou Agreement
was also not renewable or extendable; therefore,
countries governed by the agreement would have
reverted to Generalised Scheme of Preferences
(GSP), which applied to all developing countries.
The terms of GSP are, however, much less
favourable than those of the Cotonou Agreement,
thus requiring the countries affected to find
alternatives that matched the favourable terms of
Cotonou.
Moreover, it was agreed upon in principle at the
signature of the Cotonou Agreement that, upon
expiration, it could only be replaced by a WTO
compatible accord.
The expiration of the Cotonou Agreement was,
however, bound to have differential impact on
ACP countries within and across regions in Africa.
Countries classified by the UN as Least Developed
Countries (LDC), 33 of which are in Africa, even
without EPA would still have full tariff-free,
quota- free access to the EU market under its
Everything But Arms (EBA) program. In West
Africa, 12 of the 15 countries of the regional
block, the Economic Community of West African
States (ECOWAS), are classified LDC, with Cote
d’Ivoire, Ghana, and Nigeria classified as non-LDC.
Like other oil-producing countries in Africa,
Nigeria is secured by its major export commodity
being exempt from tariffs. Thus, for Nigeria,
reverting to GSP would have no significant
impact on overall exports to Europe. With
respect to Cote d’Ivoire, being a member of the
West African Economic and Monetary Union
(UEMOA), provided a potential exit strategy
should ECOWAS not had come through with a
viable agreement.
Economic Partnership Agreement
(EPA)
•
•
Under these circumstances, Ghana was left in the
precarious position of being the only country in
West Africa without a viable alternative to the
Cotonou Agreement. With a budding nontraditional export sector and an economic growth
strategy based on the expansion of exports,
Ghana would have faced serious economic
setbacks if the Interim EPA was not initialed in
2007. Exports of processed cocoa, horticultural
products and tuna, among others, would have
been faced with tariffs that could have
threatened the viability of the entire sectors.
EPA negotiations started in 2002 on an all-ACP
level; in 2004 they were then devolved to the
regional level. The main pitfalls were:
(1) Differing interpretations of the development
component. - While the ACP countries wanted to
tie import liberalisation commitments to
development aid arguing that guaranteed access
to long-term funds is crucial to overcoming
supply-side constraints and diversifying the
production base, the European Commission
insisted that EPA negotiations and talks on
development finance were two separate issues.
(2) Lack of improved market access – In
addition to the lack of long-term, guaranteed
funding to aid the implementation of EPAs, the
EU’s DFQF (duty and quota free) market access
offer was also considered insufficient.
Despite the fact that 97.6% of ACP exports
entered the EU market duty free in 2006, the
EU was not prepared to grant full DFQF market
access to ACP countries in 2008. The
Commission’s ‘generous offer’ continued to restrict
ACP countries’ rice and sugar exports for a
period of up to seven years. As it stood, the EU’s
offer amounted to little more than €100m
(£75.5m) in 2008 – compared to €1.4bn
(£1.1bn) were all products to be included
(Overseas Development Institute, 2007d).
•
Two West African countries, Côte d'Ivoire and
Ghana, initialed bilateral "stepping stone (or
"interim") EPAs" with the EU at the end of
2007. The interim EPA with Côte d'Ivoire was
signed on 26 November 2008. The interim EPA
with Ghana has not been signed. Neither
agreement has been ratified. West-Africa-European
Union negotiations of an Economic Partnership
Agreement were closed at Senior Officials level
on 24 January 2014 in Dakar and by Chief
Negotiators on 6 February in Brussels. On 28-29
March 2014 in Yamoussoukro, Ivory Coast,
ECOWAS Heads of State endorsed 'in principle'
the conclusion of the EPA. The European Union’s
deadline for signing the EPA was October, 2014
Economic Partnership Agreement
(EPA)
•
The ‘policy-hypothesis of growth’ theory states •
that an open trade regime is a prerequisite for
economic growth because it increases domestic
competition, attracts investment, promotes
diffusion of technology, stimulates cooperation
and learning processes and leads to economies
of scale. The EPAs will also foster ACPs
integration into the world economy thereby
promoting their sustainable development.
•
The removal of customs duties on imports from
Europe, could however have serious repercussions •
on national economies in Africa; A fall in
customs’ levies, would induce an increase in
European imports, but to the detriment of the
local producers; as well as to those exporters
from non-European countries. Furthermore, this
reduction of customs tariffs, could trigger-off
significant shortfalls in government revenues, and
consequently, in public expenditure
•
Many African countries actually experienced a
reversal in development gains as socio-economic
indicators declined and unilateral preferences
failed to initiate a change in the EU-ACP trade
structure. ACP countries’ share of total EU
imports has more than halved in the past 30
years and is still heavily biased towards a few
primary products with fuels and minerals the
major revenue earners (European Commission DG
Dev, 2006a).
Reasons for this poor impact of the Economic
Partnership Agreements (EPAs) to date include
the ACP countries’ manifold supply-side
constraints which prevents them from increasing
and diversifying their production base; the
missing emphasis on ‘good governance’ and
institution-building.; the unilateral character of
the preferences dictated by the EU with
individual countries rather than by consensus,
which contributed to highly-protected, noncompetitive economies.
The EPA relationship has traditionally not been
marked by a ‘partnership of equals’ but by the
EU’s increasing negligence of ACP development
concerns. The main reason for this negligence is
the fact that more and more EU member states
have no colonial ties and, like ACP countries, face
huge development challenges.
Insight
GHANA AS A COMMERCIAL ECONOMY
•
•
•
As a follow up to the discussion of the EPAs, it
is important to take note of an ongoing
transformation in the economy of Ghana from
one of an agricultural or resource based
economy to a commercial economy. This crucial
distinction, if true, should inform how government
addresses the current problems of the economy
in the medium to long term. It could also mean
that the current economic challenges the country
faces are also a consequence of a false start by
a fledging lower-middle income economy to
becoming an increasingly commercial economy.
Essentially, a commercial economy is one
characterized by economic growth that is not
driven by increased labour, hence jobless growth;
improvements in investments and capital flow,
more production or increased importation, low or
reduced consumption of locally manufactured
goods, currency fluctuations and the breaking
down of trade barriers.
If these are true of Ghana’s present economy,
and one can argue they are; then it is important
that government, not the Central Bank designs a
more comprehensive program of economic reform
to keep step with the consequences of managing
a commercial economy. Some important reform
ideas will include;
- Developing a currency policy that will ensure
competitiveness in Ghana’s international trade.
This may mean keeping the cedi low, but stable,
against its major trading countries in order to
encourage exports and improve the balance of
payments. It is important that the government
aims for proven and long term strategies in
maintaining a stable currency such as stringent
fiscal discipline and strong growth in real GDP
over a long period rather than strategies such as
international capital controls and inflexible
currency markets that will result in an
overvalued cedi in the short term.
- Developing a trade policy that is focused on
industrialization. This does not necessarily mean
protectionism but rather the promotion of
imports that feed into industry rather than
consumption. Local manufacturers should be able
to import their inputs at very low tariffs while
imports purely for the sake of consumption face
very high tariffs. For example, it should be cheap
to import leather but very expensive to import
shoes.
- Developing a labour policy that encourages
private businesses to employ more people. This
could include tax cuts and subsidies for certain
sectors of the private economy that are labourintensive and labour practices that promote
productivity-induced wage growth and flexibility
in hiring.
- An investment in technological advances in the
manufacture of local goods for which Ghana has
a comparative advantage over its trading
partners, so as to be able to satisfy domestic
demand hitherto supplied by imports. Industries
that will be obviously strategic in this regard will
include those in the textiles and furniture sectors
GHANA’S
STOCK MARKET
GHANA STOCK EXCHANGE
•
•
Trading activities on the Ghana Stock Exchange
in 2014 was not impressive in terms of price
appreciations , with a marginal 5.40% rise in
the GSE-Composite Index, to end the year at
2,261.02 points. This compares unfavorably with
a market return of approximately 79% in 2013.
Financial Stocks however, fared better with
25.58% upsurge to 2,243.63 points compared to
72% return of the GSE Financial Stocks Index in
2013
Market Capitalisation improved by GH¢3.19
billion to GH¢64.35 billion from GH¢61.16 billion
in 2013.
The Intermarket Recommendations Index provides
prospective investors and analysts with a
straight-forward assessment of a stock’s potential
to deliver returns in terms of share price
appreciation and dividend payout in the short to
medium term. The Index focuses on 3 indicators
in rating listed equities on the GSE–
Performance, Profitability & Perception.
Performance is measured by the current trend in
the share price of the stock (i.e. year-to-date
return) and has a weight of 30% on the index.
Profitability is measured by the Dividend Yield
and the Earnings per Share and has a weight of
20% and 10% respectively. Perception makes up
40% of the Index and takes into consideration
the capitalization of the stock on the market,
past performance and future prospects. The top
* Figures
as atfor31end
December,
2013 are listed in the table
stocks
year 2014
•
Indicators
Level
(Dec 31 2014)
% YTD
Change
2,261.02
5.40%
GSE Financial
Stocks Index
2,243.63
25.58%
Volume Traded
210,000,000
-10.71%
Value Traded
GHC 350
million
-12.50%
Market
Capitalisation
GHC 64,352.42
5.22%
GSE
Composite
Index
Top Gainers for 2014
HFC Bank (56%), Mega African Capital (50%),
Ecobank Transnational Incorporated (47%),
Standard Chartered Bank (36%), Ecobank Ghana
(35%), Sam Woode (33%), Societe Generale
(33%)
Top Losers for 2014
African Champions (-67%), PZ Cussons (-62%),
Aluworks (-60%), Starwin (-50%)
Top Stocks on the Intermarket Recommendations
Index
Sam Woode (2.23), UT Bank (1.87), Standard
Chartered Bank (1.87), Ecobank Ghana (1.74), PZ
Cussons (1.72)
S TO C K S O N T H E G S E
Listed
Companies
African
Champions
AngloGold
Ashanti
Aluworks
YTD
Change
(2014)
Outlook for
2014
Listed Companies
YTD
Change
(2014)
Outlook
for 2014
-66.67%
NEGATIVE
Golden Web
-25.00%
NEGATIVE
0.00%
NEUTRAL
HFC Bank
56.25%
POSITIVE
-60.00%
NEGATIVE
Mechanical Llyod
-26.32%
POSITIVE
POSITIVE
Ayrton Drug
Benso Oil Palm
Plantation
CAL Bank
5.88%
NEUTRAL
Mega African Capital
50.00%
27.73%
POSITIVE
0.00%
NEUTRAL
4.12%
POSITIVE
-29.41%
NEUTRAL
Clydestone
-25.00%
NEGATIVE
Pioneer Kitchenware
Produce Buying
Company
Camelot
Cocoa
Processing
Company
Ecobank Ghana
Enterprise
Group
Ecobank
Transnational
Fan Milk
Ghana
Commercial
Bank
Guinness Ghana
Ghana Oil
Golden Star
-25.00%
NEUTRAL
PZ Cussons
-62.03%
POSITIVE
Standard Chartered
Bank
36.21%
POSITIVE
SIC Insurance
-5.13%
NEUTRAL
POSITIVE
Starwin Products
-50.00%
NEGATIVE
POSITIVE
Societe Generale
33.33%
POSITIVE
Sam Woode
33.33%
NEUTRAL
Trust Bank Gambia
-31.43%
NEGATIVE
Total Petroleum
20.55%
POSITIVE
Transaction Solutions
0.00%
NEGATIVE
0.03%
-41.56%
-44.44%
NEUTRAL
POSITIVE
POSITIVE
Call
0.00%
35.47%
-6.91%
NEGATIVE
47.37%
POSITIVE
-20.69%
POSITIVE
9.28%
POSITIVE
-48.39%
17.98%
-14.91%
POSITIVE
POSITIVE
NEGATIVE
(302) 667 426/668 437
Tullow Oil
Unilever Ghana
UT Bank
for Further Details on Our Recommendations * Figures as at 31st December, 2014
Personal Note – Perseverance in the
Eye of an Economic Storm
•
Ghana has experienced a turbulent
macroeconomic situation for 2014. This resulted
in a sharp depreciation of the value of the cedi
especially during the first three quarters of the
year; an increasing rate of inflation; an energy
crisis and high utility prices.
•
How are you; an individual or business going to
survive and thrive during this economic
downturn? How are you going to persist in spite
of the difficulties or the delay in achieving
economic and financial success? We will discuss
10 Perseverance tools you can use to weather
the storm and keep your personal and business
finances in order.
•
•
Perseverance Tool 1 – Cash is King; Keep a
substantial part of your income in cash and
•
near-cash investments; such as short-term
investments and interest bearing accounts. This
will help you guard against unexpected crisis and
also to take advantage of unanticipated
opportunities that can arise. A strong cash-flow
also gives you flexibility in regards to business
decision-making.
Perseverance Tool 2 – Beat Inflation; Put your
money in investments that give you returns that
beat the inflation of your basket of goods (Note
that the general inflation; currently at 17%
may be very different from your personal
inflation). Therefore don’t simply keep your cash
in a bank account or stuffed away. A good rate
for an investment this year should be about
25% to enable you earn a positive return over
inflation (Such investments include fixed income
investments and stocks).
Perseverance Tool 3 – Don’t Overleverage; Don’t
over-borrow to finance your short-term needs; as
these funds will probably come at a very
expensive interest cost. Rather, make every effort
to live within your means. Practice austere
measures. Look at other ways of raising funds
rather than loan financing; such as equity
investments, mezzanine financing, leasing, bank
overdrafts, and advances from customers and
suppliers.
Perseverance in the Eye of an
Economic Storm
•
Perseverance Tool 4 – People Matter; This is the •
time to keep up on your business and social
connections. Most of the referrals you will get in
these hard times will come from people who
know you and trust you. Keep your employees
happy and appreciated. You may not be able to
increase salaries or pay bonuses but if you show
that you care; they are more likely to stand by
you and the business and work harder to ensure
success. Seek good counsel from mentors and
more successful people in your industry.
Perseverance Tool 6 – Get Knowledge; Seek
Knowledge as a major source of competitive
advantage; develop new skills and expertise;
improve your experience and education. Learn
beyond your chosen professions and industry, as
ground-breaking innovative ideas usually occur at
the intersections of different knowledge areas.
Develop ‘centers of knowledge’ in your workplace;
such as organizing brainstorming meetings,
training seminars and circulating opinionated
articles.
•
Perseverance Tool 5 – Prepare for the Future; •
“Never let a good crisis go to waste” ―
Winston Churchill. You are already biting the
bullet; so there is no reason not to do that
harder now in the short term and rather make
long-term strategic investments. Such difficult
times are actually an opportunity to do things
you thought you could never do before – There
is now less opportunity cost; you stand to lose
less but with potential of making great gains.
Perseverance Tool 7 – Diversify Revenue Streams;
Develop non-core revenue sources to augment
your traditional sources. Audit your business
processes and individual capabilities to see where
you can develop profitable ventures and make
good gains. Pursue new areas of growth such as
online, mobile technology and big data.
Diversifying your revenue streams also lowers
your risk profile and gives you capacity to
withstand unexpected shocks.
Perseverance in the Eye of an
Economic Storm
•
•
Perseverance Tool 9 – Seek Help; Don’t be afraid
or ashamed to seek help whenever and however.
People are always more ready to help than you
give them credit for and all it will take is to
ask! Seek out mentors and benefactors that can
support your business through ‘angel financing’;
and can offer sound counsel when you are faced
with a crisis situation. Talk to institutions such
as your bankers, trade associations, government
support and regulatory bodies, main suppliers
and customers. Get these people on your side.
Perseverance Tool 8 – Prioritize; There is no •
better time to be good at making a list of
priorities than doing these times. Have a budget
list for how to use money; prioritize your time;
segment your family, friends and relationships; Do
the important before the urgent; Get the right
people to work with and the wrong people off
the bus. Absolute discipline will put you ahead of
many others in the race during economic
hardships.
Perseverance Tool 10 – Have Faith in God;
Finally, be sure that the God you serve will
come through for you no matter the
circumstances. ‘Weeping may endure for a night,
but joy comes in the morning’. You can be
assured that this economic downturn will not
last long for you. Like Isaac, you will sow in
the land during a time of famine and the same
year you will reap a hundredfold because the
Lord will bless you – Genesis 26:12
NEWS HIGHLIGHTS
FOR 2014
NEWS HIGHLIGHTS OF THE YEAR
•
2nd June 2014 - The Volta River Authority (VRA) has agreed a
long-term deal with Gasol LNG Import Limited for the supply of
gas to the state-controlled power generator for electricity
generation. The conditional gas supply agreement that the VRA
has signed will require Gasol to supply 100 million standard
cubic feet of gas per day, providing an alternative gas supply
source for the Authority. ghanaweb.com
•
9th June 2014 - Tullow Oil has received approval from
government to flare gas from the Jubilee Field as it awaits
completion of the Atuabo Gas Project. The inability of the Ghana
Gas Company to complete the gas processing facility has had
serious consequences for oil production from the Jubilee Field,
with operators having to re-inject the gas back into the wells.
Currently, the operators of Jubilee Field have pegged average
production for the year at 100,000 barrels per day (bpd).
thebftonline.com
•
1.
2.
3.
4.
5.
6.
•
16th June 2014 - The Bank of Ghana has revised some of the
measures it introduced earlier in the year to stem the steep
depreciation of the cedi against other currencies. The revisions
•
include;
Mandatory repatriation of export proceeds within 60 days has
now been reversed and made dependent on agreement terms
between trading partners
Mandatory conversion of export proceeds within 5 days is
reversed. 60% of receipts can be retained with 40% converted
within 15 working days
Exporters and Providers of goods and services can receive
payment in foreign currency from non-residents
Over-the-counter cash withdrawals permitted up to a limit of
$1,000
•
Threshold for transfers aboard without documentation increased
from $25,000 to $50,000
Foreign currency loans to be granted by banks for international
trade-related transactions
23rd June 2014 - Government’s GH¢1.8 billion indebtedness to
bulk oil distribution companies (BDCs) has taken a new
dimension, with the potential to negatively affect the supply of
petroleum products across the country in the coming weeks. This
is because international suppliers of petroleum products have put
under ‘lock and key’ one week’s supply of petrol and diesel until
the BDCs honour their debt obligations to the suppliers. To
compound the problem, local banks have declined to issue letters
of credit (LCs) to the BDCs to pay off their debts to their
international suppliers because the current debt is threatening
the survival of the banks. citifmonline.com
7th July 2014 - Parliament has approved a 156 million dollar
loan facility between the government of Ghana and the
International Development Association (IDA) of the World Bank to
finance the Ghana Secondary School Education Improvement
Project. The project forms part of government’s promise to build
200 new Senior High Schools across the country. Part of the loan
facility will also be used for intervention programs such as
scholarships for students in deprived areas who may have
difficulties in paying their fees; and the provision of sanitary pads
to girl students to reduce absenteeism. citifmonline.com
14th July 2014 - The government has released GHC 370 million
to clear accumulated statutory payments. The beneficiaries are
District Assemblies Common Fund, GHC 207,483, 526.75; Ghana
Education Trust Fund (GETFund), GHC 98,096,708.29 and the
National Health Insurance Levy (NHIL), GHC 63,963,001.40. Most
statutory payments have been in arrears for several months and
have recently been a point of a legal suit when the Courts ruled
that government must make all payments to the GETFund as
prescribed by law. peacefmonline.com
NEWS HIGHLIGHTS OF THE YEAR
•
•
•
•
21st July 2014 - Organised Labour has declared a one-day
•
national protest and is asking all workers under its umbrella to
boycott work on Thursday, 24th July, 2014. According to the
General Secretary of the Trades Union Congress (TUC), the move
is to express the displeasure of labour over government’s recent
decisions on various matters and what they describe as the
worsening economic situation in the country. There are
indications that this nationwide protest could include workers
both in the formal and informal, as the leaders of organized
•
labour try to rally all workers to stay away from work and
converge at designated locations in Accra and other regional
capitals to demonstrate. Source: ghanaweb.com
28th July 2014 - Hundreds of Importers and Exporters are set to
hit the streets today to demonstrate against high levies at the
ports. Their complaints include high taxation coupled with the
Bank of Ghana introduced measures which means importers and
exporters can no longer do internal transfers of foreign
currencies. The Bank of Ghana measures include a direction that
all transactions in the country should be conducted in Ghana
cedis. It also stated that cash withdrawals over the counter from
foreign accounts shall not exceed US$10,000 or its equivalent in •
convertible foreign currency. The Association insists the costly
levies coupled with the depreciation of the cedi and the general
challenges with the economy may force them out of business.
Source: myjoyonline.com
4th August 2014 - The Government of Ghana has directed the
Ministry of Finance to open discussion with the IMF (International
Monetary Fund) to support Ghana’s ailing economy. Ghana’s
President, Mr John Mahama, after a meeting with his Economic
Advisory Committee, “directed that immediate initiatives be taken
to open discussions with the International Monetary Fund and
other Development Partners” in support of Ghana’s “programme
for stabilisation and growth”.
Government's three-year bond was heavily oversubscribed last
week by investors. Government wanted to raise about GH¢400m,
but it got GH¢644m worth of bids from investors. However it
would be paying about 25.4% as interest on the funds raised.
Government is hoping to use proceeds from the auction to
support its finances in the coming months.
Commercial banks in Ghana can now import dollars, pounds and
other international currencies for their operations. This follows the
Bank of Ghana’s decision to lift the ban on importation of
foreign exchange by commercial banks last week. This is part of
the Bank’s measures to improve supply of dollars on the market
and possibly help stabilize the falling Ghana cedi. peacefmonline,
ghanaweb, myjoyonline
11th August 2014 - Ghana’s Central Bank has reviewed the
directives it introduced some months ago to shore up the local
currency against the dollar and other major foreign currencies.
The directive, among other things, placed a limit of $1000.00 on
over-the-counter foreign exchange cash withdrawals at the
country’s banks. In a statement announcing the review, Friday, the
Bank of Ghana said the directives are reviewed with immediate
effect. It however stated that:"The Ghana cedi remains the sole
legal tender in Ghana. Therefore, pricing, advertising, invoicing,
receiving, and making payments for goods and services should be
done in Ghana cedis, unless otherwise authorised by the Bank of
Ghana”. ghanaweb.com
18th August 2014 - The Board of the Export Trade, Agricultural
and Industrial Development Fund, in June and July this year,
approved GH¢57.1million in grants and credit in favour of 28
beneficiaries. The beneficiaries of the above facility comprise 15
smallholder cooperatives and associations, eight companies and
five public institutions. A grant facility of GH¢48.5million was
approved in support of government’s initiatives and interventions
in different sectors of the economy. Major among these was an
approval of GH¢21.7million toward expanding local rice
production. Also, a huge step was taken towards large-scale shea
butter cultivation in Northern Ghana with an approval of
GH¢3.43million. Other activities that received approval were:
GH¢6.37million to support establishment of the Ghana
Commodities Exchange; GH¢2.88million for the cultivation of the
kenaf plant by smallholders to serve as raw material for
manufacturing of jute sacks in Ghana. Approval was also given for
honey production, oil palm processing, fish production and
production of organic fertiliser. thebftonline.com
NEWS HIGHLIGHTS OF THE YEAR
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25th August 2014 - The Bank of Ghana has moved to prevent
microfinance companies in operation, from changing their names
to cover their tracks after failing to manage depositor’s funds
prudently. The Central Bank said the move follows its observation
that some of the companies change their names in an attempt
to hide liquidity challenges and seek a fresh start. The Head of
Other Financial Institutions Department of the Bank of Ghana,
Raymond Amanfu said the central bank took the decision to bar
name-changes in the microfinance sector due to continuous abuse
of that privilege by companies seeking a fresh start after
undergoing difficult times. More than 50 microfinance companies
have collapsed since 2013 due to poor managerial skills, while
some have been used as a conduit for the perpetration of fraud
through Ponzi schemes that lure depositors with absurdly
lucrative investment interest rates. citifmonline.com
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1st September 2014 - A team from the International Monetary
Fund (IMF) will hit the shores of Ghana this week to discuss how
the country’s ailing economy can be salvaged. The team will
engage government in negotiations and then fashion out a
programme to suit the country’s needs as well as discuss policy
alternatives with the Bank of Ghana.
The Bank of Ghana financed 70 percent of the government's
GH¢4.8billion budget deficit in the first half of the year,
continuing a trend of excessive lending to the government which •
analysts warn could harm the economy. The level of financing
appears immoderate when compared to recent years, as analysis
of deficit- financing sources since 2008 showed no time when the
level of central bank lending to government was more than 60%
of the first-half budget deficit.
About a quarter of Ghanaians are poor, the Ghana Living
Standards Survey (GLSS) has revealed. The GLSS, conducted by the
Ghana Statistical Service (GSS), says a seven-year assessment has •
also revealed that the dynamics of poverty is still very much a
rural phenomenon. The report was based on the findings of sixth
GLSS (GLSS6). It was carried out nationwide in 18,000 households
in 1,200 enumeration areas, between October 2012 and October
•
2013 by the GSS. citifmonline.com, thebftonline.com,
ghananewsagency.org
8th September 2014 - Ghana will seek just $1 billion from a
Eurobond this year as it heads into talks with the IMF aimed at
restoring fiscal balance as part of a larger plan of economic
reform, President John Mahama said in an interview on Friday.
The West African country may look for further financing if it can
secure an assistance deal with the International Monetary Fund
(IMF), Mahama said, adding that former finance minister Kwesi
Botchwey would lead talks due to start on September 16.
Two emergency power barges are being constructed by the
government to generate 450 megawatts (MW) of power to
stabilise energy supply in the country, the Minister of Energy and
Petroleum, Mr Emmanuel Armah-Kofi Buah, has said. The two
power barges, each of which has 225 MW, are expected in the
country by the end of the second quarter of 2015. reuters.com,
ghanaweb.com
15th September 2014 - Ghana’s annual consumer price inflation
rose to a fresh four-year high of 15.9 percent in August from
15.3 percent in July, the West African nation's statistics office said
on Wednesday. Non-food inflation rose by 24.0 percent from July
while food inflation stood at 5.1 percent in the same period, a
rise of 0.1 percent month on month. The government hopes
seasonal factors including the harvest will help lower inflation
later this year.
Ghana sold a $1 billion Eurobond on Thursday at a coupon rate
of 8.125 percent, lower than analysts had expected given the
fiscal difficulties faced by the West African producer of cocoa, gold
and oil. The bond was oversubscribed with orders of up to $3
billion.
Ghana's cocoa regulator signed a $1.7 billion loan with
international banks on Thursday to finance purchases for the
next cocoa season. The loan was oversubscribed by 15 percent
and Cocobod will receive an additional $200 million on demand
to be drawn in the first three months next year. reuters.com
NEWS HIGHLIGHTS OF THE YEAR
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22nd September 2014 - The Bank of Ghana has maintained the
policy rate at 19%. The Governor of the Bank, Dr Kofi Wampah
in a presentation to the media on developments in the economy
cited positive outlook in the general macro-economic environment
to leave the rate unchanged. He said the latest forecast shows
that inflation is likely to stay slightly above the revised target of
13 plus or minus two percent by the end of the year. Dr
Wampah said the expected inflows from the Eurobond and the
cocoa syndicated loan will provide liquidity on the foreign
exchange market. Dr Wampah said the Central Bank survey on
consumer and business confidence in the economy improved
during the second quarter. gbcghana.com
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29th September 2014 - Ghana has taken legal action under a
U.N. convention to resolve a maritime border dispute with Ivory
Coast over water close to oil fields licensed by British firm Tullow
Oil. Ghana filed the suit under the U.N. Convention on the Law
of the Sea after 10 bilateral meetings failed to resolve the issue.
The two countries have never officially agreed on the boundary
and their maps of territorial waters overlap. A resolution is
crucial for oil and gas exploration and it could end any
uncertainty for Tullow, which first discovered the Tweneboa,
Enyenra, and Ntomme (TEN) cluster development in 2009 in
Ghana's Deepwater Tano licence close to the disputed area.
reuters.com
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6th October 2014 - Ghana sharply raised the price it will pay •
cocoa farmers for the new 2014/15 season to 5,520 cedis
($1,720) per tonne in a bid to deter smuggling to Ivory Coast,
authorities have said. The rise represents a 63 percent increase
on the 3,392 cedis price cocoa regulator Cocobod paid last
season. It is also slightly higher than the price the world's top
producer, Ivory Coast, announced this week that it would pay to
its farmers for the new season. Ghana, the world's second biggest
producer, will aim to produce more than 1 million tonnes in the
season to begin on Friday, up from a forecast of 900,000 tonnes
in the just-ended season. reuters.com
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13th October 2014 - The International Monetary Fund (IMF)
estimates Ghana's debt to gross domestic product (GDP) ratio for
year-end 2013 to be 56 percent, a release received from the
fund on Saturday stated. It said the projection by the fund was
consistent with the figures released by the Bank of Ghana, the
country's monetary authority. On Wednesday, some media houses
referred to the latest edition of IMF's report dubbed the Fiscal
Monitor which had put Ghana's debt-to-GDP ratio at 71 percent,
describing it as unsustainable. The release however explained, the
71 percent mentioned by an IMF official at a press briefing, was
a projection for the end of 2015. "The number corresponds to
the level projected at end-2015 under our baseline scenario
published in the World Economic Outlook, which assumes the
continuation of current economic policies," the statement added.
Ghana accessed 1.0 billion U.S dollars in Eurobonds last month,
while the country's cocoa regulator, the COCOBOD also raised 1.7
billion dollars in a forward-trade of the country's cocoa stock for
next year. globalpost.com
20th October 2014 - Ghana's annual consumer price inflation
rose to a fresh four-year high of 16.5 percent in September from
15.9 percent the previous month, the country's statistics office
said on Wednesday. The increase was driven by non-food inflation
with the highest rises in housing, water, electricity, gas and other
fuels, government statistician Philomena Nyarko told a news
conference. These saw 63.5 percent inflation. "The non-food
inflation rate of 24.1 percent is about four times as high as the
food inflation rate of 5.8 percent," Nyarko said. The overall
figure is the highest since March 2010 and it left inflation well
above the government's full-year target of 13 percent, plus or
minus 2 percent. The government revised the target in July from
an earlier 9.5 percent forecast. reuters.com
NEWS HIGHLIGHTS OF THE YEAR
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27th October 2014 - Twelve labour unions, including public
health and education sector workers, have declared a nationwide
sit-down strike, over what they refer as "government's failure and
undue delay" in paying part of their pension contributions into a
private account. The mandatory work-based two-tier pension
scheme is aimed at providing employees higher lump sum
benefits than previously available under the Social Security and
National Insurance Trust, and expected to be managed privately.
The government has been working to contract Pension Alliance
Trust (PAT) to manage it, although PAT, a licensed insurance
company has capacity to handle this second tier, workers see it
as an attempt by government to impose the firm on them.
Instead they are calling on government to allow full
operationalisation of the Public Sector Pension Scheme expected
to focus more on public sector workers. theafricareport.com
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3rd November 2014 - The US Federal Reserve has called time on
its $4.5tn bond-buying programme, halting a radical monetary
policy introduced nearly six years ago to steer the world’s largest
economy through the financial crisis. The central bank, led by
Janet Yellen, said the final tranche of bonds under its quantitative
easing programme would be bought this month, but it committed •
to keeping record low interest rates for “a considerable time”.
However, starting next year the Bank of Japan will increase its
balance sheet by 15 percent of GDP per annum and will extend
the average duration of its bond purchases from 7 years to 10
years. theguardian.com, forbes.com
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10th November 2014 - Provisional Foreign Direct Investments
(FDI) figures for Ghana from January to September has hit 1.3
billion dollars. That is according to provisional figures put forward •
by the Ghana Investment Promotion Centre (GIPC). The amount
represents projects registered with the Centre by foreign investors
and represents about a 100 percent jump from what was
recorded for the same period last year. myjoyonline.com
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17th November 2014 - The Monetary Policy Committee MPC of
the Bank of Ghana has increased the policy rate, the rate at
which commercial banks borrow from the Central Bank by two
hundred basis points. The policy rate which was at nineteen
percent now stands at twenty-one percent. The Governor of the
Bank of Ghana and chairman of the MPC, Dr Henry Kofi Wampah
at a media briefing in Accra said latest forecasts indicate
inflation will continue to remain outside the target band. He said
the increase in the rate is to ensure that the existing tight
monetary policy stance is maintained. gbcghana.com
24th November 2014 - The 2015 Budget, presented recently in
Parliament by Ghana's Finance Minister, Seth Terkper, looks to
reduce the country's high fiscal deficit, in part through the
imposition of a special petroleum tax. In 2015, the Government
will implement a number of outstanding value-added tax (VAT)
measures and in particular the introduction of VAT on fee-based
banking and financial services at the headline 17.5 percent rate,
as well as a 5 percent VAT rate on real estate, already passed by
Parliament.
In addition, the Government is proposing to impose a special
petroleum tax of 17.5 percent on petrol, diesel, liquefied
petroleum gas, natural gas, and kerosene, as part of this VAT
reform, alongside a change in the petroleum product pricing
structure. Excise tax on petroleum will newly be levied by
volume, rather than by value. In addition, the National Fiscal
Stabilization Levy, charged at five percent on the profits of
specific companies, and the special import levy of one to two
percent will be extended to 2017. Last, the withholding tax on
directors' fees will be increased from 10 percent to 20 percent.
tax-news.com
NEWS HIGHLIGHTS OF THE YEAR
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1st December 2014 - Gold prices slid downward after Swiss
voters nixed a measure to bump up the nation’s gold reserves,
while oil prices also fell to a five-year low as the Organization of
the Petroleum Exporting Countries (OPEC) decided to maintain •
crude oil production levels. The rejected Swiss proposal, defeated
by 78% of voters, would have required the Swiss National Bank
to more than double its gold reserves, holding at least 20% of
its assets in the precious metal. The measure would have
challenged the bank’s policy of capping the Swiss franc at 1.20
per euro. After the vote, gold at one point fell more than two
percent to $1,142.90 per ounce XAU=, while silver prices, which
usually mirror gold prices, hit a five-year-low at $14.50 per
ounce XAG=. Meanwhile, oil prices also slumped to $64.10 per
barrel after OPEC rejected calls from some member states,
including Iran and Venezuela, to tighten crude oil output and vie
to keep oil prices from tumbling amidst a flurry of growth in
the U.S. shale oil market. time.com
8th December 2014 - According to the latest report by
Transparency International, Ghana has improved marginally in
terms of corruption in the last three years. In 2012, Ghana
scored 45 points out of 100, 46 points in 2013 and 48 in 2014
[0 means highly corrupt while 100 means very clean]. Ghana is
currently ranked 61st out of the 175 countries surveyed across
the world. The Corruption Perceptions Index ranks countries and
territories based on how corrupt their public sector is perceived.
Ghana is ranked the 6th least corrupt in Africa and 2nd in West
Africa after Cape Verde. Ghana also performed better than
countries such as South Africa, Kenya, Italy, China, Russia and 114
other countries in total. citifmonline.com, transparency.org
15th December 2014 - Ghana and the International Monetary
Fund probably won’t come to an agreement on aid until April
and the country will struggle to meet revenue targets next year,
according to Fitch Ratings Ltd. The world’s second-biggest cocoa
producer turned to the Washington-based lender as it struggles
to narrow its fiscal deficit. A target to reduce the gap to 6.5
percent of gross domestic product in 2015 from 9.5 percent is
“exceptionally ambitious,” said Carmen Altenkirch, director of the
sovereign group at Fitch. “I’ve penciled in a figure of 8 percent,”
she said at a conference today in London.
“The real challenge for them will be raising revenue at a time
when the economy isn’t performing well.” bloomberg.com
22nd December 2014 - The US government has expressed its
support to Ghana’s decision to seek financial bailout from the
International Monitory Fund (IMF). The US government believes
that decision and other measures including the Millennium
Challenge Compact and the coming on stream of the Atuabo Gas
plant, it is confident that the country’s economy will bounce back
within six to 12 months. Mr Cretz, US Ambassador to Ghana,
noted that the country has experienced economic challenges over
the past few years and he believes that with the kind of
confluence of positive events that are taking place, the Ghana’s
economic prospects look much brighter than it has been in the
past. “The MCC second compact which is really a vote of
confidence in Ghana because there are very few countries that
will get a second compact and that second was the result of the
commitments that were fulfilled by Ghana in the first MCC
compact,” he said. The US Ambassador added that, “this one is
$498 million and we hope that it is going to transform the
electric power sector. I think that is going to be a critical game
changer for the future of Ghanaian economy.” myjoyonline.com
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• Emmanuel K. Adu-Sarkodee
Group Chief Executive
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[email protected]
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Executive Director, Savings & Loans
CA, MBA, Bcoms, DEdu
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Executive Director, Asset Management
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Research
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Asset Management
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